Porter’s Five-Force Model(P5CFM)Rev: Sep, 2013

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

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P5CFM (1/3)

■ What is P5CFM (Porter’s Five-Force Model)?– A tool to know about difference forces that impact on a company’s ability to compete– A tool to diagnose the principal competitive pressures in a market– A tool to assess how strong and important each force is

Degree of

Existing Rivalry

Bargaining Power of Sup-

pliers

Bargaining Power of Sup-

pliers

Threat of Potential Entrants

Threat of Potential Entrants

Bargaining Power of Buy-

ers

Bargaining Power of Buy-

ers

Threat of Sub-stitutesThreat of Sub-stitutes

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P5CFM (2/3)

Force Description

Degree of existing rivalry The major determinant of the competitiveness of the industry for most industries

Threat of potential entrants Many new entrants will decrease profitability for all firms in the industry

Bargaining power of suppliersWhen suppliers of raw materials, components, labor, and services have a strong power, they may refuse to work with the firm, or charge excessively high prices for unique re-sources

Bargaining power of buyersThe ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes

Threat of substitutesThe existence of products outside of the realm of the common product boundaries in-creases the propensity of customers to switch to alternatives

Degree of

Existing Rivalry

Bargaining Power of Suppliers

Bargaining Power of Suppliers

Threat of Poten-tial Entrants

Threat of Poten-tial Entrants

Bargaining Power of Buyers

Bargaining Power of Buyers

Threat of Substi-tutes

Threat of Substi-tutes

■ How to use P5CFM?– External Analysis for the firm

– Analysis all the activities according to the description below

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P5CFM (3/3)

■ Example– A lubricants industry analysis