Porter’s Five Forces Model

• Devised by Michael Porter

• A framework for analyzing
the nature of competition
within an industry.
Threat of New Entrant

1. High capital requirements: New entrants may need significant funds to

start a business, making it harder to compete.
2. Economies of scale: Existing companies enjoy cost advantages due to
large-scale production, making it tough for newbies to match prices.
3. Brand loyalty: Customers stick to trusted brands, making it challenging
for newcomers to gain market share.
4. Government regulations: Compliance with laws and regulations can be
complex and costly for new entrants.
5. Access to distribution channels: Established players often control
distribution networks, limiting new competitors' reach.
Example:
The threat of new entrants in the Domino’s pizza industry is
moderate. While the initial capital investment to open a Domino’s
pizza business might be low, establishing brand recognition,
efficient delivery systems, and securing prime locations can be
significant barriers.

How it's used: Domino's continuously invests in branding,

technology, and supply chain management to differentiate itself and
make it difficult for new entrants to compete. They leverage their
existing network of stores and delivery infrastructure to maintain
market dominance.
Bargaining Power of Buyer
1. Large buyer groups: When buyers purchase in bulk, they have more
negotiating power over prices and terms.
2. Availability of substitutes: If alternative products or services exist,
buyers can easily switch, reducing their dependence and bargaining power.
3. Price sensitivity: Buyers with low switching costs or easy access to price
information can pressure sellers to offer competitive prices.
4. Product differentiation: Unique offerings or strong brands can reduce
buyer power by limiting their options and willingness to switch suppliers.
5. Buyer information: Well-informed buyers can demand better deals and
terms, especially if they understand market dynamics and competitors'
offerings.
Example:
Customers in the pizza industry have moderate to high bargaining power
due to the abundance of Domino’s pizza options and low switching costs.

How it's used: Domino's focuses on providing value through promotions,

deals, and loyalty programs to retain customers. They also collect feedback
to improve their offerings and ensure customer satisfaction.