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 Engineering
POSTECH
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
Threat of Potential
Entrants
Bargaining Power
of Suppliers
Degree of
Existing Rivalry
Threat of
Substitutes
2
Bargaining Power
of Buyers
P5CFM (2/3)
■ How to use P5CFM?
Threat of Potential
Entrants
– External Analysis for the firm
– Analysis all the
activities according
to the description
below
Bargaining
Power of
Suppliers
Degree of
Existing Rivalry
Bargaining
Power of
Buyers
Threat of Substitutes
Force
Degree of existing rivalry
Threat of potential entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitutes
Description
The major determinant of the competitiveness of the industry for most industries
Many new entrants will decrease profitability for all firms in the industry
When 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 resources
The ability of customers to put the firm under pressure, which also affects the customer's sensitivity
to price changes
The existence of products outside of the realm of the common product boundaries increases the
propensity of customers to switch to alternatives
3
P5CFM (3/3)
■ Example
– A lubricants industry analysis
4