Porters 5 Force Analysis
Porters 5 Force Analysis
Threat of New Entrants – The easier it is for new companies to enter the industry, the more cutthroat competition there will be. Factors that can limit the threat of new entrants are known as barriers to entry. Existing loyalty to major brands
Incentives for using a particular buyer (such as frequent shopper programs)
High fixed costs
Scarcity of resources
High costs of switching companies
Government restrictions or legislation
If substitutes are similar, it can be viewed in the same light as a new entrant.
Power of Suppliers – This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a companys margins and volumes, then it holds substantial power
There are very few suppliers of a particular product
There are no substitutes
Switching to another (competitive) product is very costly
The product is extremely important to buyers – cant do without it
The supplying industry has a higher profitability than the buying industry
Power of Buyers – This is how much pressure customers can place on a business . If one customer has a large enough impact to affect a companys margins and volumes, then the customer hold substantial power. Here are a few reasons that customers might have power:
Small number of buyers
Purchases large volumes
Switching to another (competitive) product is simple
The product is not extremely important to buyers; they can do without the product for a period