Porters 5 Forces

Porter's five forces

Porter's five forces are used for analysis of external environment. Analysis is done for judging the industry attractiveness from an Incumbent point of view. In Porter's five forces framework, we assess the external environment on following heads.

Overall assessment

1 Intensity for rivalry

2 the threat of entry

3 bargaining power of buyers

4 bargaining power of suppliers

5 the threat of substitutes

Assessment along these heads can be further done by judging the attractiveness of an industry on following sub heads.

The Threat of Rivalry

The Threat of Rivalry(PART A)

1 Number of competitors

2 Industry growth

3 Fixed cost/storage cost

4 Differentiation

5 Switching cost

6 Openness of terms of sale

7 Excess capacity

8 Strategic stakes

The threat of rivalry -Barriers to exit (PART B)

1 Asses specialization

2 Fixed cost of exit

3 Govt. Restrictiveness

The threat of entry

1 Economies of scale

2 Product differentiation

3 Brand identity

4 Customer switching cost

5 Access to channels of distribution

6 Capital requirement

7 Access to technology/ know how

8 Access to raw materials

9 Govt. policy/protection

The bargaining power of buyers

1 Number of buyers

2 Availability of substitutes

3 Switching costs

4 Buyers threat of backward integration

5 Industries threat of backward integration

6 Contribution to quality

7 contribution to cost

8 Buyers profitability

The bargaining power of suppliers

1 Number of suppliers

2 availability of substitutes

3 switching cost

4 suppliers threat of forward integration

5 Industry's threat of backward integration

6 contribution to quality

7 contribution to cost

8 Industry's Importance to supplier

The threat of substitutes

1 availability of close substitutes

2 switching cost

3 substitutes