This document provides an overview of Porter's Five Forces model for industry and competition analysis. It explains the objectives of the model, which are to identify the factors that shape industry competition and assess the long-term attractiveness of an industry. The model examines five competitive forces: the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitute products, and the intensity of competitive rivalry. The document provides guidance on using the model, including a table to calculate the degree of power within each force. It also includes a case study applying the model to analyze competition in the industry of Apple Inc.

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 identify what factors shape the To assess and manage the
character of competition within an long-term attractiveness of an
industry industry
Four Objectives
To explain the relationship
To assess the structural
between the five dynamic forces
attractiveness of the analysed
that affect an industry’s
industry
performance
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6. Model of Competition
The power of The threat of
industry Potential new entrants
competitors Entrants
The bargaining
The power of
bargaining Supplier Industry Buyer buyers
power of Power Competitors Power
suppliers
The threat of
substitute Substitutes
products
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
Concentration of
Five Forces
Marketing and Advertising
regulations, Electronic power in the middle Model applied
device regulaions and and proximity to the
consumer laws customer to Apple Inc.
Threats
P P Buyer
Suppliers Industry
o o Vertically orientated
Apple has more power towards the customer-
over its suppliers, able w Apple is strictly w
focused on design side, Apple does most
to make strong e e of its business in its
demands and marketing retail-locations and
r r
online stores
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-5-
forces-how-they-work-3.html 15

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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