Porter's 5 Forces

when does rivalry increase?

many similar sized competitors, low switching costs, high exit barriers

effects of rivalry

price competition, lower sales volume, increased costs

responses to rivalry

differentiate, increase switching costs, pursue growth, acquire competitors

effects of threat of substitutes

a price ceiling and higher marketing costs

responses to threat of substitutes

strong marketing, differentiation, customer lock in

threat of new entrants - 4 barriers

cost related, knowledge related, customer related, government related

examples of cost related barriers

economies of scale, capital requirements, cheap supply sources

examples of knowledge related barriers

technology, patents, specialized capabilities

examples of customer related barriers

differentiation, switching costs, brand loyalty, distribution access

examples of government related barriers

regulations and policy

what are the effects of new entrants?

more competition, pressure on prices, investment needed to retain customers or discourage entry

responses to the threat of new entrants

build scale, control distribution, differentiate, build loyalty, create switching costs, get government to create regulations to increase barriers

what increases bargainaing power of suppliers

few suppliers, few good substitue suppliers/inputs, high switching costs, threat of forward integration

effects of increased supplier bargaining power

higher input costs, restricted supply, reduced quality

responses to increased supplier bargaining power

form strategic alliances with suppliers, develop internal supply, redesign product to use different inputs

how does buyer power increase

few or concentrated buyers, standardized products, low switching costs, strong buyer information, backward integration

effects of increased buyer power

lower selling prices, increased costs to satisfy buyer demand

responses to increased buyer power

differentiation, market strongly, create switching costs, build customer lock in, form alliance with sellers

when to use the five forces

diagnosing external causes of low profitability, compare the attractiveness of different industries, identifying barriers the company must overcome to enter an industry