Michael Porter's Five Forces analysis is a critical tool for evaluating the competitive landscape and underlying structure of an industry, aiding in effective strategy formulation and risk management. By examining factors like the level of rivalry, barriers to entry, and the power dynamics with suppliers and buyers, businesses can make informed decisions on resource allocation and market positioning. The framework also serves as a valuable guide for investors to assess industry attractiveness and long-term profitability. Overall, this analysis is indispensable for achieving a sustainable competitive advantage and informed strategic planning.

1. MODULE 4:
MESOENVIRONMENT:
PORTER’S FIVE FORCES
STRATEGIC
MANAGEMENT
DR. EMMANUEL DOTONG
Associate Professor of Business
ejdotong@alum.up.edu.ph
STRATEGIC TOOLS AND MODELS

2. Module
Coverage
01
02
03
Business Mesoenvironment
Porter’s Five Forces
Porter’s Five Forces Application
MODULE 4:
MESOENVIRONMENT:
PORTER’S FIVE FORCES

3. 01
BUSINESS MESOENVIRONMENT
Definition

4. BUSINESS
The Mesoenvironment, also known as the industry environment,
refers to the set of factors and conditions—such as competitors,
suppliers, and customers—that directly affect an organization's
competitive position within a specific industry. This environment
is more controllable and immediate than the macro-
environment, which includes broader economic, social, and
political factors.
Understanding the industry environment is crucial for strategic
planning as it impacts pricing, market entry, product
development, and customer engagement. Accurate assessment
of these variables enables a company to formulate effective
strategies to achieve a competitive advantage.
MESOENVIRONMENT
Microenvironment
Mesoenvironment
(Industry Environment)
Macroenvironment

5. 02
PORTER’S FIVE FORCES
Definition, Factors, and Indicators

6. COMPETITIVE ANALYSIS
PORTER’S FIVE FORCES
Michael Porter's Five Forces analysis is a critical tool for evaluating
the competitive landscape and underlying structure of an industry,
aiding in effective strategy formulation and risk management. By
examining factors like the level of rivalry, barriers to entry, and the
power dynamics with suppliers and buyers, businesses can make
informed decisions on resource allocation and market positioning.
The framework also serves as a valuable guide for investors to
assess industry attractiveness and long-term profitability. Overall, this
analysis is indispensable for achieving a sustainable competitive
advantage and informed strategic planning.

7. PORTER’S FIVE FORCES MODEL
INDUSTRY FORCES
RIVALRY
AMONG
EXISTING
COMPETITORS
This force looks at the
extent of competition
within an existing
industry.
THREAT OF
SUBSTITUTE
PRODUCTS
This force looks at the
availability and viability of
alternative solutions to
the product or service
offered.
THREAT OF
NEW
ENTRANTS
This examines the ease
with which new
competitors can enter an
industry.
BARGAINING
POWER OF
BUYERS
This force considers how
much power buyers (or
customers) have in
negotiations.
BARGAINING
POWER OF
SUPPLIERS
This force examines how
much negotiation power
suppliers have in setting
prices and terms.

8. RIVALRY AMONG EXISTING COMPETITORS
A high number of
competitors can
increase rivalry, as
more firms vie for
the same customer
base.
Slow growth can
intensify rivalry as
firms compete for
market share.
Low differentiation
often leads to
increased rivalry
because there are
fewer features to
set products apart.
High fixed costs
create pressure for
firms to utilize
capacity,
sometimes
sparking price
wars.
Rapid technological
changes can make
competition fierce,
as companies try
to out-innovate
each other.
Measure the
number of direct
and indirect
competitors in the
market.
Analyze industry
reports for
historical and
forecasted growth
rates.
Evaluate how
unique your
product/service is
compared to
competitors.
Calculate the ratio
of fixed to variable
costs in the
industry.
Track the pace of
innovation and
new technology
adoption in the
industry.
Number of
Competitors
Industry Growth
Rate
Product
Differentiation
Cost Structure
Factor
Indicator
Rate of Technological
Change
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
FACTORS CONTRIBUTING TO RIVALRY

9. THREAT OF SUBSTITUTE PRODUCTS
The more
alternatives
available, the
higher the threat.
If substitutes offer
a better price-
performance ratio,
they become more
attractive.
Low switching
costs make it
easier for
customers to adopt
substitutes.
The extent to
which consumers
are aware of and
understand
substitutes.
Regulatory
changes can either
inhibit or
encourage
substitutes.
Inventory the
range of
alternative
solutions
consumers might
consider.
Conduct a
comparative
analysis on cost
and performance
metrics between
your product and
potential
substitutes.
Evaluate the costs
and efforts
required for
customers to
switch to
substitutes.
Assess marketing
activities and
educational
materials provided
by makers of
substitute
products.
Stay updated on
industry
regulations that
might affect the
availability or
attractiveness of
substitutes.
Availability of Close
Substitutes
Price-Performance
Ratio of Substitutes
Switching Costs Consumer Awareness
Factor
Indicator
Regulatory
Environment
FACTORS AFFECTING THREAT OF SUBSTITUTE PRODUCTS
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers

10. THREAT OF NEW ENTRANTS
The financial
resources needed
for R&D,
production,
marketing, and
distribution.
Regulations,
licenses, and tariffs
that could prevent
or hinder new
competitors.
Established
companies may
have strong brand
recognition,
making it difficult
for new entrants.
Existing companies
may have cost
advantages that
new entrants can't
match initially.
Secured
distribution
channels can be a
barrier, limiting
market access for
new entrants.
Review industry
reports and
financial
statements to
assess capital
intensity.
Examine regulatory
requirements and
any proposed
changes to
legislation affecting
the industry.
Conduct consumer
surveys to gauge
brand loyalty and
recognition.
Compare cost
structures of
industry leaders
and potential new
entrants.
Analyze the
availability and
power dynamics of
major distribution
channels.
Capital Requirements Government Policies Brand Equity Economies of Scale
Factor
Indicator
Distribution
Channels
BARRIERS TO ENTRY
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers

11. BARGAINING POWER OF BUYER
A high number of
suppliers increases
buyer power, as
they have more
options to choose
from.
Regulations,
licenses, and tariffs
that could prevent
or hinder new
competitors.
If the product or
service is highly
differentiated, it
may reduce the
bargaining power
of buyers.
Well-informed
buyers can
negotiate better
terms.
Low switching
costs empower
buyers to change
suppliers without
significant
penalties.
Measure the
number of
alternative
suppliers in the
market.
Analyze the
distribution of
customer sizes in
your market,
noting particularly
influential buyers.
Evaluate the
degree of
customization or
specialized
features your
service offers.
Examine the
transparency of
pricing, feature
sets, and other key
variables in your
industry.
Assess the
financial,
emotional, and
time costs for
buyers to switch to
competitors.
Number of Suppliers Size of Each Buyer
Uniqueness of
Services
Information
Availability
Factor
Indicator
Switching Costs
FACTORS AFFECTING BUYER POWER
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers

12. BARGAINING POWER OF SUPPLIERS
Fewer suppliers
increases their
bargaining power.
Specialized or
unique inputs give
suppliers more
power.
Higher costs to
change suppliers
strengthen their
bargaining power.
A concentrated
supplier base can
command more
power.
The threat of
suppliers moving
into your business
space.
Assess the number
of suppliers
available for key
inputs.
Evaluate how
specialized the
inputs are and
whether
alternatives exist.
Calculate the
financial,
operational, and
time costs of
switching suppliers.
Review market
share distribution
among suppliers.
Monitor suppliers'
activities and
strategic directions
for signs of
forward
integration.
Number of Suppliers Uniqueness of
Service or Input
Switching Costs
Supplier
Concentration
Factor
Indicator
Forward Integration
Risk
FACTORS AFFECTING SUPPLIER POWER
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers

13. 03
PORTER’S FIVE FORCES APPLICATION
PROCEDURES AND EXAMPLE

14. INDUSTRY ANALYSIS
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
PORTER'S FIVE FORCES
THREAT OF NEW ENTRANTS
BARGAINING POWER OF BUYERS
BARGAINING POWER OF SUPPLIERS
RIVALRY AMONG EXISTING COMPETITORS
THREAT OF SUBSTITUTE PRODUCTS
/SERVICES
THREAT OF SUBSTITUTE PRODUCTS
/SERVICES

15. INDUSTRY ANALYSIS:
PORTER’S FIVE FORCES
THREAT OF NEW ENTRANTS
MODERATE PRESSURE
High Competition: Restobars typically
operate in a saturated market with numerous
competitors vying for customer attention.
Low Differentiation: The services and
products offered often have low differentiation,
which increases competition.
High Fixed Costs: Running a Restobar
involves significant fixed costs, compelling
businesses to fill tables to break even or turn a
profit.
High rivalry may result in competitive pricing and high marketing costs,
thereby reducing profit margins.
BARGAINING POWER OF BUYER
HIGH PRESSURE
THREAT OF SUBSTITUE PRODUCTS
HIGH PRESSURE
Threat of Substitute Products/Services
BARGAINING POWER OF SUPPLIERS
MODERATE PRESSURE
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
RIVALRY AMONG COMPETITORS
HIGH PRESSURE

16. INDUSTRY ANALYSIS:
PORTER’S FIVE FORCES
THREAT OF NEW ENTRANTS
MODERATE PRESSURE
High Availability: Other dining and
entertainment options exist, like food delivery,
home cooking, or specialized establishments
(e.g., cinemas, coffee shops).
Technological Advances: Online food
delivery apps are becoming increasingly
popular.
The threat of substitutes is high due to the multitude of alternatives
available for dining and leisure.
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
BARGAINING POWER OF BUYER
HIGH PRESSURE
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
THREAT OF SUBSTITUE PRODUCTS
HIGH PRESSURE

17. INDUSTRY ANALYSIS:
PORTER’S FIVE FORCES
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
THREAT OF NEW ENTRANTS
MODERATE PRESSURE
Capital Requirements: Initial costs can be
high, serving as a barrier to entry.
Regulatory Barriers: Licenses and permits
are generally required.
Brand Loyalty: Established Restobars can
count on some level of customer loyalty, which
is a barrier for new entrants.
The threat may be moderate, depending on the niche and location.
However, the market is usually open to innovative concepts.

18. INDUSTRY ANALYSIS:
PORTER’S FIVE FORCES
THREAT OF NEW ENTRANTS
MODERATE PRESSURE
High Choice: Consumers have a wide range of
Restobars to choose from.
Low Switching Costs: It's easy for customers
to switch to a competitor.
Price Sensitivity: In economic downturns,
customers may be more price-conscious.
Customers have high bargaining power, forcing Restobars to offer
competitive prices, promotions, or loyalty programs.
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
BARGAINING POWER OF BUYER
HIGH PRESSURE

19. INDUSTRY ANALYSIS:
PORTER’S FIVE FORCES
THREAT OF NEW ENTRANTS
MODERATE PRESSURE
Commodity Ingredients: Basic food and
drink supplies are commodities with many
suppliers.
Specialized Products: Unique or high-quality
ingredients may have fewer suppliers,
increasing their bargaining power.
Long-term Contracts: May be in place,
reducing the power of suppliers.
Supplier power is generally moderate but can become significant if
specialized items are crucial for differentiation.
BARGAINING POWER OF BUYER
HIGH PRESSURE
THREAT OF SUBSTITUE PRODUCTS
HIGH PRESSURE
Threat of Substitute Products/Services
BARGAINING POWER OF SUPPLIERS
MODERATE PRESSURE
Rivalry
Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers

20. INDUSTRY ANALYSIS
Rivalry Among
Existing
Competitors
Threat of
new
entrants
Threat of
substitute
products
or services
Bargaining
power of
buyers
Bargaining
power of
suppliers
PORTER'S FIVE FORCES
THREAT OF NEW ENTRANTS
BARGAINING POWER OF BUYERS
BARGAINING POWER OF SUPPLIERS
RIVALRY AMONG EXISTING COMPETITORS
THREAT OF SUBSTITUTE PRODUCTS
/SERVICES
THREAT OF SUBSTITUTE PRODUCTS
/SERVICES

21. PORTER’S FIVE FORCES ANALYSIS
INDUSTRY FORCES CURRENT PRESSURE FUTURE PRESSURE RATIONALE
RIVALRY AMONG EXISTING
COMPETITORS
HIGH PRESSURE HIGH PRESSURE
High rivalry may result in
competitive pricing and high
marketing costs, thereby
reducing profit margins.
THREAT OF SUBSTITUTE
PRODUCTS /SERVICES
HIGH PRESSURE HIGH PRESSURE
The threat of substitutes is
high due to the multitude of
alternatives available for
dining and leisure.
THREAT OF NEW ENTRANTS MODERATE PRESSURE MODERATE PRESSURE
The threat may be moderate,
depending on the niche and
location. However, the market
is usually open to innovative
concepts.
THREAT OF SUBSTITUTE
PRODUCTS /SERVICES
HIGH PRESSURE HIGH PRESSURE
Supplier power is generally
moderate but can become
significant if specialized items
are crucial for differentiation.
BARGAINING POWER OF
SUPPLIERS
MODERATE PRESSURE MODERATE PRESSURE
Supplier power is generally
moderate but can become
significant if specialized items
are crucial for differentiation.

22. END
ASSOC. PROF. EMMANUEL DOTONG
Management Consultant
ejdotong@alum.up.edu.ph