Five force for stratergy

1. CPEMC Studio I MCEM I S22 I By Group 2
Money Plant High Street
1
1
Five Forces as per Michael Porter
Threat of
Entry
Bargaining Power
Buyers
Bargaining Power of
Suppliers
Threat of
substitute
Product
Rivalry among
substitute
Competitors
• Porter’s five forces model is an analysis tool that uses five industry forces to determine
the intensity of competition in an industry and its profitability level.
• The model that identifies and analyzes five competitive forces that shape every industry
and helps determine an industry's weaknesses and strengths, and structure to
determine corporate strategy.

2. CPEMC Studio I MCEM I S22 I By Group 2
Money Plant High Street
2
2
Threat of Entry
This force determines how easy (or not) it is to enter a particular industry. If an industry is
profitable and there are few barriers to enter, rivalry soon intensifies. When more
organizations compete for the same market share, profits start to fall. It is essential for
existing organizations to create high barriers to enter to deter new entrants.
Supply-side
economies to
scale
Demand-side
benefits to scale
Customer
switching
costs
Capital
requirements
Incumbency
advantages
independent
of size
Unequal Access to
distribution
channels
Restrictive
Government policy

3. CPEMC Studio I MCEM I S22 I By Group 2
Money Plant High Street
3
3
The Power of Suppliers
Strong negotiating position enables suppliers to sell customers low-quality or more
expensive raw resources. As a result, the purchasing companies' earnings are immediately
impacted since they must pay more for supplies.
Suppliers are powerful negotiators when:
1. There are numerous buyers but few suppliers;
2. Large suppliers pose a threat of forward integration
3. Alternative raw resources are scarce
4. Limited resources are held by suppliers
5. The price to changing raw materials is very significant.

4. CPEMC Studio I MCEM I S22 I By Group 2
Money Plant High Street
4
4
The Power of Buyers
When consumers have significant negotiating power, they can force industry producers to
offer cheaper prices or better quality goods. Greater quality items typically have higher
manufacturing costs, whereas lower prices result in lesser profits for the company. Lower
producer earnings occur from both cases. When bargaining, buyers are powerful.
1. Purchasing in bulk or managing several points of access to the ultimate consumer
2. Few purchasers are available
3. Switching suppliers has minimal switching costs
4. There are several alternatives
5. Customers are cost conscious..

5. CPEMC Studio I MCEM I S22 I By Group 2
Money Plant High Street
5
5
The Threat of substitutes
Where close substitute products exist in a market, it increases the likelihood of customers
switching to alternatives in response to price increases. This reduces both the power of
suppliers and the attractiveness of the market.
The following factors cause a higher threat of substitutes for an industry:
1. Customers can easily switch between products.
2. Substitute products are readily available to customers.
3. Substitute products have better features
4. Substitute products have higher quality
5. Substitute products have lower costs