PORTER’S FIVE FORCES:

The goal is to draw a blueprint of the state of competition that shows the balance of power in a specific business situation. A widely use
tool for this is the Porter’s Five Forces model.
According to Michael Porter “the state of competition in an industry depends on five basic competitive forces”. These are: rivalry among
existing firms; threat of substitute products or services; bargaining power of buyers; bargaining power of suppliers; and threat of new entr
(Porter 1980). The figure to the right shows a graphic model of the five forces and sample drivers for each.

This exercise consists of assessing the drivers listed in the figure to the right and thinking of other relevant ones in order to shed light on th
balance of power and potential changes that could result in the attainment or loss of competitive advantages. It is important to highlight t
these exercises should be conducted by a multidisciplinary, cross-functional team, which is well acquainted with the product and its
environment, in order to enhance their results.

Force Sample Drivers

Number and size of suppliers
Supplier Power Geographical coverage
Uniqueness of service
Relationships with customers
Costs of switching supplier

Buyer Power Number of buyers

Proportion of sales per buyer
Costs of switching products
Price sensitivity
Order size and frequency

Size of barriers to entry

New Market Entrants Economies of scale
Capital investment required
Special competences required
Technology protection

Price/quality of alternatives
Substitutes Changes in distribution channels
Costs of switching
Fashion and trends
Legislative effects

Number and size of firms

Competitive Rivalry Industry size and trends
Costs of leaving the market
Product/service ranges
Differentiation strategy

SOURCE: (Porter 1980)

e balance of power in a specific business situation. A widely used

ends on five basic competitive forces”. These are: rivalry among

of buyers; bargaining power of suppliers; and threat of new entrants
rces and sample drivers for each.

ht and thinking of other relevant ones in order to shed light on the

nt or loss of competitive advantages. It is important to highlight that
nal team, which is well acquainted with the product and its

Product Assessment
Force

Supplier Power

Buyer Power

New Market
Entrants

Substitutes

Competitive
Rivalry
Sample Drivers Product/Service Assessment
Number and size of suppliers
Geographical coverage
Uniqueness of service
Relationships with customers
Costs of switching supplier
Number of buyers
Proportion of sales per buyer
Costs of switching products
Price sensitivity
Order size and frequency
Size of barriers to entry
Economies of scale
Capital investment required
Special competences required
Technology protection
Price/quality of alternatives
Changes in distribution channels
Costs of switching
Fashion and trends
Legislative effects
Number and size of firms
Industry size and trends
Costs of leaving the market
Product/service ranges
Differentiation strategy