Economics assignment

Name: Maged Abdel-Salam Mahmoud Elgohary Gov 07 (Group C) No.18

How relevant market types to Porter’s five forces model?
Porter’s five forces model: Porter's five forces model is a tool for analyzing competition of a business.
1. Competitive rivalry
Rivalry competition is high when there are just a few businesses equally selling a product or service, when
the industry is growing and when consumers can easily switch to a competitor's offering for little cost.
Rivalry competition is high when there are just a few businesses equally selling a product or service, when
the industry is growing and when consumers can easily switch to a competitor's offering for little cost.
Perfect competition Monopolistic competition Oligopoly Pure monopoly
Very low - because of Moderately - because of High - because of the No competitive
the large number of the differentiated products. few numbers of sellers. rivalry because there
sellers. is only one seller.
2. Bargaining power of suppliers
This force analyzes how much power a business's supplier has and how much control it has over the
potential to raise its prices, which, in turn, would lower a business's profitability.
In addition, it assesses the number of suppliers available: The fewer there are, the more power they have.
Businesses are in a better position when there are a multitude of suppliers.
Perfect competition Monopolistic competition Oligopoly Pure monopoly
Very low - because of the High - because of the few numbers of Very high – because market
large number of suppliers. suppliers. dominated by one supplier.
3. Bargaining power of customers
This force examines the power of the consumer and their effect on pricing and quality. Consumers have
power when there aren't many of them but there are plentiful sellers, as well as when it is easy for
customers to switch from one business's products or services to another's.
Buying power is low when consumers purchase products in small amounts and the seller's product is very
different from any of its competitors.
Perfect competition Monopolistic Oligopoly Pure monopoly
competition
High - because of the large Low - because of Very low - because of the No power of customer
number of sellers and the the differentiated few numbers of sellers and because there is only
homogenous products. products. the differentiated products. one seller.
4. Threat of new entrants
This force considers how easy or difficult it is for competitors to join the marketplace in the industry being
examined.
The easier it is for a competitor to join, the greater the risk of a business's market share being depleted.
Perfect competition Monopolistic competition Oligopoly Pure monopoly
High - because there Moderately - because there are no barriers Very low - because there are
are no barriers to enter to enter the market but should have a clear many barriers to entry (legal –
the market. definite plan of differentiate. technological – natural).
5. Threat of substitute products or services
This force studies how easy it is for consumers to switch from a business's product or service to that of a
competitor. It looks at the number of competitors, how their prices and quality compare to the business
being examined and how much of a profit those competitors are earning, which would determine if they
can lower their costs even more.
Perfect competition Monopolistic competition Oligopoly Pure monopoly
Very high - because of High - because of the Very low - because of No threat of substitutes
the large number of differentiated products with the few numbers of because the product has
sellers with different quality and prices. sellers. no close substitute.
homogenous products.