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Potential Entrants. Threat of new entrants. Suppliers. Buyers. Bargaining power. Bargaining power. Threat of substitute products or services. Substitutes. Porter’s Five Forces. Introduction

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Porter’s Five Forces

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Porter s five forces

Potential Entrants

Threat of new entrants

Suppliers

Buyers

Bargaining power

Bargaining power

Threat of substitute products or services

Substitutes

Porter’s Five Forces

  • Introduction

  • Porter’s competitive analysis identifies five fundamental forces that determine the attractiveness of an industry. Analysing these five forces allows organisations to make decisions about the attractiveness of current or future markets. This analysis also provides insights into potential opportunities or weaknesses in particular markets:

  • New entrants

  • Bargaining power of buyers

  • Substitute products or services

  • Bargaining power of suppliers

  • Rivalry among existing competitors

  • Further Information:

  • Turner, S., 2002, ‘Tools for Success: A Manager Guide’, McGraw Hill Professional, Berkshire, UK

  • ten Have, S., ten Have, W., Stevens, F. and van derElst, M., 2003, ‘Key Management Models’, Financial Times Prentice Hall, UK

Existing Competitors

Instructions

The template on the next page may be used to record key information on each of the five forces.

Key Steps:

Explore each of the five forces in turn:

  • New entrants

  • Are there any barriers for new entrants into the market?

  • High capital requirements• Access to distribution channels

  • High switching costs for customers• Brand image

  • Bargaining power of buyers

  • What bargaining power do buyers have?

  • High or low profit margins• Low switching costs

  • Undifferentiated products / services

  • Substitute products or services

  • How easily could your product / service be substituted for another type of product or service?

  • What new technologies might make your product / service redundant?

  • Bargaining power of suppliers

  • What bargaining powers for suppliers have?

  • Absence of substitutes • Switching costs

  • Value of suppliers component to your product / service

  • Rivalry among existing competitors

  • What rivalry currently exists between competitors?

  • Slow industry growth• Pricing strategies

  • Commodity products / services


Porter s five forces

Potential Entrants:

Existing Competitors:

Suppliers:

Buyers:

Substitutes:

Porter’s Five Forces


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