The ultimate objective of doing industry analysis is to write down a list of opportunities and

threats.

Porter Five Forces

1) Bargain of Buyers: If the bargaining power of buyers in the industry is high, it means
buyers can influence prices which sets a gap on the profitability of the industry. If the
bargaining power of buyers is low, it means that the industry can charge the prices which
it likes and buyers cannot bargain or influence prices.
2) Bargain of Suppliers: They have power over the industry. That power determine the
profit, potential of that industry. If suppliers dictate their prices, it means that the supplier
power over the industry is high. If the suppliers are providing those commodities which
many other suppliers can also supply, then the bargaining power of supplier in that
industry is low.
3) Rivalry among competing sellers: There is a difference between rivalry and competition.
Competition is good for the industry, rivalry is bad for the industry. Competition adds
value in the industry, companies are competing to make better products, better services,
better value to serve customers in a better way. Competition adds value. Rivalry
subtracts values. It is when you do things which reduce the profit potential of the
industry. Price cutting is rivalry, not competition. Introducing a product with better
features is competition.
4) Threat for new entrants: If it is very easy for people to enter the industry, that makes the
industry unattractive because anyone can come in and that is not an attractive industry.
This is an industry analysis and not investor analysis. May be the investor will think that
if it is easy to enter the industry so that is a good industry as it is easy to enter. Under
this heading, we will look from industry analysis perspective. If you have a company in
an industry, would you like other companies to enter easily in that industry or would you
like that it would be difficult for the company to enter. If the threat for new entrants is
high, it reduces the profit potential in that industry. If the threats for new entrants is low,
and it is not easy to enter the industry, that raises the profit potential of that industry.
5) Threat for substitute products: Substitute products are not competing products.
Competing products belong to the same industry. Substitute products come from
different industries. For example, plastic is a substitute for steel. Plastic is from different
industry. Internet is a substitute for telephone. Internet and telephone are both from
different industries. When the threat for substitute products is high that makes the
industry less attractive. When the threat for substitute products is low, that makes the
industry more attractive.

Macroeconomic Environment Components:

● The Economy
● Technology
● Societal Values and Lifestyle
● Population & Demographics
● Legislation and Regulation
These components are impinging upon the industry structure (5 Forces).

The effect of economy on Bargain of buyers, bargain of Suppliers, Rivalry among competing
sellers, threat for new entrants, threat for substitute products

The effect of technology on Bargain of buyers, bargain of Suppliers, Rivalry among competing
sellers, threat for new entrants, threat for substitute products

The effect of societal Values and Lifestyle on Bargain of buyers, bargain of Suppliers, Rivalry
among competing sellers, threat for new entrants, threat for substitute products

The effect of population and demographics on Bargain of buyers, bargain of Suppliers, Rivalry
among competing sellers, threat for new entrants, threat for substitute products

The effect of legislation and Regulation on Bargain of buyers, bargain of Suppliers, Rivalry
among competing sellers, threat for new entrants, threat for substitute products

Factors that affect strength of rivalry: