Porters 5 Forces Flashcards
What are the 5 forces ?
Threat of substitute products
Threat of new entrants
Industry rivalry
Bargaining power of suppliers
Bargaining power of buyers
What is threat of substitute products and when is the threat high ?
It is how easily a customer can switch to a competitors product
The threat is high when :
There are many products available
Customer can find the product or service for a lower price
The quality of the competitions product is better
What is threat of new entrants and when it the threat high ?
It is when a new competitor can enter the same market and weaken the organisations power
The threat is high when :
Capital requirements to start business are low
Customers can easily switch
The key technology is not hard to acquire or is not protected well
What is industry rivalry and when is it high ?
It considers the intensity of rivalry of competition among existing competitors in the market
It is high when :
When there are a number of small or equal competitors
Customers have low switching costs
Industry is growing
Exit barriers are high and rivals stay and compete
What is bargaining power of suppliers and when is it more powerful ?
Considers how strong is the position of the seller and how much control a supplier has over increasing the price of supplies
More powerful when :
Suppliers are well organised
Few substitutes available
Switching cost from one supplier to another is high
What is bargaining power of buyers and when is it powerful ?
Considers how much control buyers have to drive down your products price
It is high when :
Few buyers chasing too many goods
Buyers purchase in bulk
Buyers cost of switching product is low
Buyers are price sensitive
