Porters 5 Forces Flashcards
What is porters 5 forces for?
How businesses compete and operate
5 forces
Threat of new entry
Supplier power
Buyer power
Threat of subs
Industry rivalry
Threat of new entry
How easy it is for competitors to get into market
Barriers to enter - specialist knowledge/loyal customers
Few barriers = easy for new competitors to enter market + increase rivalry
Supplier power
The power suppliers have to negotiate terms and prices
High supplier power = few suppliers/suppliers product is essential/low availability of subs
Business should build strong relations with suppliers/backward vertical integration
Buyer power
The power buyers have to negotiate terms and prices
High = there is little difference between products offered by competitors ans busi/if buy in large quantities
Business should develop usp/lower prices to attract customers (pice penetration)
Threat of subs
Subs = alternative product that may deliver same benefits to customer. Threat of subs may change with social trends e.g health trend for consumers to use coconut oil instead of olive
High threat = alternative products exist/alternative prices fall
Business should lower prices/develp usp
= means if btw
Industry rivalry
Level of competition + aggressive rivalry between business within mark
Comp is fierce = easy entry to market/easy for customers to switch/little differentiation of products
Business should lower costs of stuff to compete
