The Five Competitive Forces That Shape Strategy

The Five Forces That Shape Industry Competition

Threat of New Entrants

Bargaining Power of Suppliers

Rivalry Among Existing Competitors

Bargaining Power of Buyers

Threat of Substitute Products or

1. Threat of entry:
Barriers to entry: 1. 2. 3. 4. 5. 6. 7.

Services

Supply-side economies of scale. Demand-side benefits of scale. Customer switching costs. Capital requirements. Incumbency advantages independent of size. Unequal access to distribution channels. Restrictive government policy.

Expected retaliation:

2. 3. 4. 5.

The power of suppliers The power of buyers The threat of substitutes Rivalry among existing competitors

Factors, Not Forces:

Industry growth rate Technology and innovation Government Complementary products and services

Changes in Industry Structure:

Shifting threat of new entry Changing supplier or buyer power Shifting threat of substitution New bases of rivalry

Implications for Strategy:

Exploiting industry change Shaping industry structure: Redividing profitability Expanding the profit pool.

Typical Steps in Industry Analysis Common Pitfalls Competition and Value