The document summarizes Michael Porter's 5 Forces model for analyzing competition within an industry. It describes the five competitive forces as the threat of new entrants, the bargaining power of suppliers and buyers, rivalry among existing competitors, the threat of substitute products, and concludes that the model should be used at the industry level when evaluating a firm's strategic position and developing corporate and business unit strategies. Each industry requires its own five forces analysis to understand competitive dynamics.
3. Threat Of New Entrants Brings new capacity and a desire to gain market share that puts pressure on prices,costs…. Barriers to entry: Supply side economies of scale Demand side benefits of scale Customer Switching costs Capital requirements Unequal access to distribution channels
5. Rivalry among existing Competitors Sustainable competitive advantage through innovation. Level of advertising expense Powerful competitive strategy The visibility of proprietary items on the Web used by a company which can intensify competitive pressures on their rivals.
6. Threat of Substitute Products Attractive Price Performance trade off to the industry’s products … (Telephone to skype) The buyer’s cost of switching to the substitute is low…
7. Conclusion…… When making a qualitative evaluation of a firm's strategic position Should be used at the line-of-business industry level. Corporate strategy is the selection of industries (lines of business) in which the company should compete. Each line of business should develop its own, industry-specific, five forces analysis