A framework to analyze an industry's weaknesses and strengths
Porter's Five Forces is a model that identifies and analyzes five competitive forces that influence every industry and helps identifying an industry's weaknesses and strengths.
Threat of New Entrants
This force looks at how easy or difficult it is for new companies to enter a particular market and compete with existing businesses. If it's relatively easy for new businesses to enter the market, then existing companies need to work harder to keep their customers and maintain their market share.
Bargaining Power of Suppliers
This force considers the influence that suppliers have over a business. They can impact a business by influencing the price and quality of the materials or inputs that they provide. Once suppliers have too much power, they can raise prices and demand better terms, which can reduce the profit margins of the business.
Bargaining Power of Buyers
This force considers the influence that customers have over a business. If customers have a lot of bargaining power, they can demand lower prices or better quality products, which can put pressure on businesses to lower their prices or improve their products and services.
Threat of Substitute Products or Services
This force considers the potential for alternative products or services to enter the market and replace or compete with the existing products or services. If there are many alternatives available, customers may switch to those products or services instead of using the existing ones.
Rivalry Among Existing Competitors
This force looks at how intensely existing businesses compete with one another in the market. If competition is high, then businesses need to work harder to differentiate themselves from their competitors and offer better products, prices, or services to attract customers. This can put pressure on profit margins and make it more challenging to maintain market share.
Other Types of industry analysis
- PESTEL Analysis Broad Factors Analysis
- SWOT Analysis