The five forces in this framework include the followings:

1. How loyal are the end users in this industry?

Potential
2. How troublesome or hard is it for the end users to switch and
Competitors/ Barrier
use another product?
of Entry (Companies
3. Does it require a large seed capital to enter this industry?
currently not
4. Do entries to this industry regulated by government?
competing in the
5. How hard is it to gain access to the distribution channels?
industry but have the
6. How long does it take for new staff to acquire the necessary
necessary resources to
skills to do the work?
do so)

Threat of Substitutes 1. How many close substitutes are available?

(Products in another 2. How pricy are the substitutes?
industry that satisfy 3. What is the perceived quality of the substitutes?
similar needs)

1. How many close competitors exist in the industry?

2. What are the sizes of your close competitors?
3. What is the industry structure? Is it a fragmented, consolidated,
Intensity of rivalry
oligopoly or monopoly industry?
among established
4. What is the current industry growth rate?
firms (Direct
5. How high are the exit barriers? Do your competitors have a high
competitors competing
committed fixed cost thus they have to operate even at a loss?
for market share)
6. How diversified are your competitors?
7. How extensively do your direct competitors advertise?

Bargaining power of 1. How large are your buyers’ company?

buyers (Customers) 2. How many companies are there for the buyer to choose from?
3. Are the buyers buying a huge volume?
4. Do you depend only on a few buyers to sustain your sales?
5. How hard is it for the buyers to switch and use a competing
product?
6. Are the buyers purchasing from you as well as your
competitors?
 7. Do the buyers have the capacity to enter your business and
produce the goods themselves?

1. Are there substitutes for your suppliers’ products?

2. Do your suppliers serve multiple industries? Does the total
industry revenue accounting for only a small portion of the
Bargaining power supplier’s total revenue?
of suppliers 3. Do you have high switching cost to use another supplier?
4. Do suppliers have the capacity to enter your business?
5. Does your company capable to enter the supplier’s business?

After analyzing each force individually, the next step is to interrupt the results of this framework
as a whole.  For example, if you have strong suppliers that are raising their prices, are you able to
shift the cost to your customers? Do you have a weak buyer?  You can also formulate strategies
according to the results to change your situation.  For instance, you can integrate backward and
stop buying from your suppliers.  You can also launch your own retailers and sell your own
goods through your own distribution channels.  Depending on your own situation, try to
formulate the right strategies to increase your bargaining power against the five forces.