THE FIVE FORCES MODEL

BY MICHAEL E. PORTERQUEENSBOROUGH COMMUNITY COLLEGE

CIS – 205 INTENSIVE WRITING COURSEJEFFERY CHONG

THE FIVE FORCES

Rivalry among existing

competitors

Threat of New

Entrants

Bargaining power of

Buyers

Threat of substitute product or

services

Bargaining power of suppliers

Bargaining power of Buyers• Bargaining power of Buyers is assessed by

analyzing the ability of buyers to directly impact the price they are willing to pay for an item.

• It is high when buyers have many choices of whom to buy from and low when they have fewer choices.

Bargaining Power of Suppliers• Bargaining Power of Suppliers is assessed by the

suppliers' ability to directly impact the price they are charging for supplies (including materials, labor, and services).

• It is high when buyers have a small number of choices to buy from and low when they have many choices.

• It is also high when few good substitute raw materials are available and cost of switching raw material suppliers is high.

Threat of Substitute Product or Services• A substitute product is one that may offer the same

or similar benefits to a company as a product from another industry. The threat of a substitute is the level of risk that a company faces from replacement by its substitutes.

• It is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose.

Threat of New Entrants• The threat of New Entrants affects the competitive

environment for the existing competitors and influences the ability of existing firms to achieve profitability.

• It is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market.

Rivalry Among Existing Competitors• It is high when competition is fierce in a market and

low when competition is more complacent.• Although competition is always more intense in some

industries than in others, the overall trend is toward increased competition in just about every industry

MICHAEL E. PORTER

Michael Eugene Porter is the Bishop William Lawrence University Professor at The Institute for Strategy and Competitiveness, based at the Harvard Business School.

Bibliography• The Five Forces Model. (n.d.). Retrieved from

https://sites.google.com/site/qccdstein512/unit-1/chapter-2-identifying-competitive-advantage

• Porter's five forces analysis. (n.d.). Retrieved from https://en.wikipedia.org/wiki/Porter's_five_forces_analysis