Porters five forces

Question 1

What is it

Answer 1

The model is a framework for analysing the nature competition

Question 2

Factors affecting Profits

Answer 2

(SCBSR)
Suppliers
Customers
Barriers
Substitutes
Rivalry

Question 3

Power of customers

Answer 3

Powerful customers are able to exert pressure to drive down prices, or increase the
required quality for the same price, and therefore reduce profits in an industry.

Question 4

Power of suppliers

Answer 4

If the supplier forces up the price paid for inputs, profits will be reduced. It follows that
the more powerful the customer (buyer), the lower the price that can be achieved by
buying from them.

Question 5

Threat of new entrants

Answer 5

If new entrants move into an industry they will gain market share & rivalry will intensify.

Question 6

Threat of substitutes

Answer 6

If there are many credible substitutes to a firm’s product, they will limit
the price that can be charged and will reduce industry profits.

Question 7

Competition

Answer 7

leads to price wars, merges etc