Porter’s Five Forces

• Michael E. Porter
• Porter’s Five Forces model is a business analysis model that explains different
industries are able to sustain different levels of profitability (depending on
the competition)
• It allows business managers to calculate the level of competition within their
company’s industry
• Profitability Decreases = Competition Increases
 Competition
in the
industry

Potential of
new entrants Power of
into the suppliers
industry Porter’s
Five
Forces

Threat of
Power of
substitute
customers
products
 Competition in the Industry

• It evaluates the number and activity of company rivals

Potential of new entrants into the industry
• If entry is easy, it indicates that there is a high level of competition
 Threat of substitute products

• A new good or service coming onto the market eroding sales of established
products
 Power of suppliers

• The bargaining power of the industry suppliers

• Increasing costs of the raw materials leads to decreasing profit of the company
 Power of customers

• Consumer's Bargaining Power

• If consumer has a strong bargaining position it will lead then to driving down prices of
the goods and decreasing company profit