Michael porter the proponent of these 5 forces, suggests that the “collective strength of these forces

determines the ultimate profit potential of an industry.”

Bakit? Because they influence elements of your ROI or returns, like price, cost and capital investments.
So here makikitan naton kayano sugad an pricing hit usa ka company, maybe because there is a threat of
substitution, tas an aton cost of input materials tungod ha power of suppliers to dictate what will be
their price. And lastly an aton threat of new entrants, will shape the what will be the investment
required for them to enter, or for companies to keep doing better.

Una, our threat of new entrants, porter suggests that “New firms will try to enter an industry and
compete away the value, either passing it on to buyers in the form of lower prices or dissipating it by
raising the costs of competing.” (either creating quality to the products being offered or intensive
marketing strats. So in the industry of insurance, the threat of new entrants is high, why? Some
companies operate in the niche of underwriting insurance—kikitaon nira an risk of insuring imo car,
home or imo life to determine if it is profitable to them to take a chance, kadalasan mga banks or
investment houses . And that is why, these banks or other financial services companies entering are also
a threat, because instead of diving into insurance, they offer kinds of investments or other ways to help
you manage your money.

Ikaduha, the power of suppliers, porter suggests that “Suppliers have the ability to restrict profitability
in an industry that determines the prices and quality of raw materials and other inputs” like if taasan it
presyo hit imo supplier, that will surely affect imo pagcosting and ultimately imo profit. So in insurance,
their power is kind of moderate. Why? Rather an pakiana, meada ba supplier it insurance companies?
Like dre man hira mfg company. Asya na ngadi it twist, it doesn’t mean nga raw materials la an
isusupply, kundi funds geapon, like in insurance where are their source of funds?. For them it is the
premium paid by customers, hence we look at customers as suppliers also. But customers have the
option diin nira igiinvest ira money. However, insurance agencies cannot reduce the premiums below a
minimum support level. Thereby, the bargaining power of suppliers is medium.

Ikatulo, the power of buyers, porter suggests “Customers must be willing to pay a price for the offering
that exceeds the firm's cost of production for the firm to survive in the long run.” In insurance kasi
nowadays it is treated like a commodity, and like it is now important to insure yourself from all things
that you fear losing. So in insurance the power is from moderate to high, it is because there are 2 types
of buyers: individual and corporate. Large corporate clients who pay millions of dollars in premium have
a lot more bargaining power than individual clients. As a whole, the buyers have moderate to high
bargaining power

Pang-upat, porter suggests “The threat of substitutes determines the extent to which some other
product or service can meet the same buyer needs, thereby constraining the profit potential.”

In the insurance it is high, because it can be substituted by financial products and services such as
mutual funds and stocks, As the PH aims to develop its financial market, its types of products and
services available to individual investors will greatly increase in recent years, which will reduce the
attractiveness of insurance products because of its relatively low returns.

Lastly, porter suggests “Intensity of rivalry influences the prices that firm can charge and causes firms to
either compete away the value created by passing it on to buyers in the form of lower prices or to
dissipate the value through the increased costs of competing.”

So in insurance, competition is high, The Insurance companies with low cost structure/or implements a
low cost strategy,(A pricing strategy in which a company offers a relatively low price to stimulate
demand and gain market share. It is one of three generic marketing strategies) better customer service
and greater efficiency will be able to beat out its competitors. Considering a lot of companies exist in
this sector, the intensity of competition would definitely be high.