This document provides an overview of Porter's Five Forces model for analyzing industry competition and outlines how to apply the model. It explains the objectives of the model are to assess the long-term industry attractiveness and industry competition. The model examines five competitive forces: threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and competitive rivalry within an industry. It provides guidelines for using a table to analyze each force. Finally, it presents a case study analyzing Apple Inc. using the Five Forces model and ranks the competitive forces impacting the company.

1. Guide: Porter’s Five Forces
Industry and competition analysis
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3. What is in this Guide?
What is Porter’s Model?
Porter’s Five Forces Model of Competition
How to use the Porter’s model?
• Table to Calculate the Degree of Power
• Competitive Rivalry
• Threat of New Entrants
• Bargaining Power of Suppliers
• Bargaining Power of Buyers
• Threat of Substitute
Case Study: Apple Inc.
Bibliography
Contact at ReportLinker.com
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4. What is Porter’s Model?
Objectives and Model
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5. Four main Objectives of Porter’s Model
To assess and manage the
To identify what factors shape the
character of competition within an
industry
long-term attractiveness of an
industry
Four Objectives
To explain the relationship
between the five dynamic forces
that affect an industry’s
performance
To assess the structural
attractiveness of the analysed
industry
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6. Model of Competition
The power of
industry
competitors
The
bargaining
power of
suppliers
Potential
Entrants
Supplier
Power
The threat of
substitute
products
Industry
Competitors
The threat of
new entrants
Buyer
Power
The bargaining
power of
buyers
Substitutes
source: Porter, « Competitive Strategy », 1980
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7. How to use Porter’s Model?
Guide: Answer the following questions
and you will get a detailed and in-depth
analysis of the competition and industry
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8. Calculated Degree of Power
Power
+
-
Competitive Rivalry
Supplier power
Substitute power
Buyers power
Power of new entrants
Guidelines:
Fill in the table with crosses by answering the questions from the following sections to
measure the degree of power available in the industry. The analysis depends on the
number of crosses in each of the boxes.
For example: If the competitive rivalry has many crosses in the ‘+’ box, the power of
competitors are low, etc.
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9. What is the Rivalry among existing
Competitors?
Competitors
• How many direct or indirect competitors are there?
• What are the size of my competitors?
• How diverse are my competitors?
Industry
• What is the industry growth rate?
• What are the strategic stakes?
Products
• How different is my product?
• What are the buyers’ switching costs?
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10. What are New Entrants Threats?
Production costs
• Are there any economies of scale?
• What are the capital requirements?
• What is the absolute cost advantage?
Brand
• How different is the product?
• How strong is the brand identity?
• How high are the switching costs?
Distribution
• Is it easy to access distribution channels?
• What are the government policies?
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11. What is the Bargaining power of
Suppliers?
Substitution
• What are the switching costs of suppliers and firms in the
industry?
• Is there any presence of substitute inputs?
Players
• What is the suppliers’ concentration?
• How high is the concentration of suppliers?
Integration
• What is the suppliers’ threat of forward integration?
• What is the buyers’ threat of backward integration?
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12. What is the Bargaining Power of
Buyers?
Buyer‘s type
• How strong is the difference between buyer concentration vs. firm
concentration?
• What is the buyer volume?
• What are the buyer switching costs relative to the firm’s switching costs?
• Is the buyer capable of backward integration?
Information
• How much information does the buyer have?
• Are they attracted by substitutes?
• How much does product differences effect the buyer?
Brand awareness
• How does the buyer judge the brand identity?
• How high is the impact of quality/performance?
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13. What is the Threat of Substitute
Products?
What is the relative price performance of substitutes?
• What are the prices of my products comparatively?
• Are the substitute prices stable? (increase or decrease)
How high are the switching costs?
• What are the differences relative to my products?
• What would the costs incurred be to change my products?
What is the buyer propensity to substitute?
• What are the buyers preferences on the product category?
• What are the differences regarding my products? (quality, prices)
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14. Case Study: Apple Inc.
Porter’s Five Forces Model applied to
Apple Inc.
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15. Potential Entrants
The Government
Marketing and Advertising
regulations, Electronic
device regulaions and
consumer laws
Concentration of
power in the middle
and proximity to the
customer
Five Forces
Model applied
to Apple Inc.
Threats
Suppliers
Apple has more power
over its suppliers, able
to make strong
demands
P
o
w
e
r
Industry
Apple is strictly
focused on design
and marketing
Threats
Substitutes
(as far as they exist)
Apple is better equipped
to compete with
horizontal players vs. HP
or Sony, not as vertically
integrated towards the
consumer
Source: http://foodandretail.blogspot.com/2007/10/porter-5forces-how-they-work-3.html
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P
o
w
e
r
Buyer
Vertically orientated
towards the customerside, Apple does most
of its business in its
retail-locations and
online stores

16. Case Study: Apple Inc.
Ranking of Power and Threats facing Apple Inc.
Power
+
Competitive Rivalry
X
Supplier power
X, X
Substitute power
X
Buyers power
X, X
Power of new entrants
-
X
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17. Bibliography
 Porter's Five Forces - Problem Solving Techniques , from
MindTools.com
Porter 5 Forces How they work
What is Porter’s 5 Forces Analysis? , from
Papers4You.com
Michael Porter’s website on Harvard Business School:
Faculty and Research
Company Profile Apple Inc. , from ReportLinker.com
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18. Contact
Do you need more info about this guide? Or about a market you are analysing?
• www.reportlinker.com
• + 33 4 37 37 16 37
• contact@reportlinker.com
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