Porters Five Forces
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Threat of
New Entry
Supplier Power
Competitive
Rivalry
Threat of
Substitution
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Buyer Power
What is it?
Porters five forces is a tool developed by Michael Porter to analyse
the forces that might work against an organisation being
successful. It is used to identify potential threats that might arise
and to assess the balance of power in an industry. It is useful
therefore in strategic decision making, as an aid to consider where
best to strengthen position and identifying gaps in market.
How do I use it?
Under each of the ‘forces’ on the diagram, consider which
threaten or affect your organisation. Questions to think about are
on the next slide.
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Threat of new entrants - How loyal are your customers? Could they be
persuaded by a new organisation? What is the likelihood of a new business
entering the market? What are the costs involved for them? Are their
difficulties to entering the market? What might potentially deter new
entrants?
Buyer Power - How powerful are buyer groups? Could they combine
resources and force prices down? How many alternatives are there for the
product or service? How easy is it for customers to switch?
Threat of substitution - How many different types of this product or
service are there? How important are the substitutes considered to be?
How easy is it to develop a substitute to your product or service?
Supplier Power – How many suppliers are there? How large are the
supplier organisations? How unique is the product or service? What is the
cost of changing supplier?
Competitive Rivalry - How many competitors are there? What is the
difference in quality? What other differences are there? What is the cost of
leaving the market? How loyal are customers?
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