Porter's five forces-3.8.2

Question 1

Draw Porter’s five forces diagram.

Question 2

What are the 5 competitive forces that shape strategy?

Answer 2

Bargaining power of buyers.
Bargaining power of suppliers.
Intensity of rivalry within the industry.
Threat of substitute products.
Threat of new entrants.

Question 3

Describe threat of new entrants.

Answer 3

New entrants move into industry gain market share and rivalry will intensify.

Position of existing firms stronger if there are barriers to entering the market.

If barriers to entry are low then the threat of new entrants will be high, vice versa.

Question 4

Describe bargaining power of suppliers.

Answer 4

If firm’s suppliers have bargaining power, they will:

• Exercise that power.
• Sell products at high price

Supplier forces up price, profits reduce.

Question 5

Describe threat of substitute products.

Answer 5

Substitute’s- price limited, profit reduced.

Customer loyalty/ availability limit extent of threat.

Rapid tech change in creating new subs.

Question 6

Describe determinants of intensity of rivalry.

Answer 6

Number of competitors in the market:
Competitive rivalry higher in industry with many current/ potential competitors.

Market size and growth prospects:
Comp tends to be most intense in slow growth/ declining markets.

Product differentiation/ brand loyalty:
Greater customer loyalty less intense comp.
Lower degree of product differentiation greater intensity of price competition.