Porter’s Five Forces Activity Worksheet

Watch the Two Teachers’ video about ‘Porter’s Five Forces’ then complete
the tasks below to apply your knowledge.
Video link: Porter's Five Forces

1. Whilst watching the video, complete the table below to explain each of Porter’s Five Forces
and how each force impacts the businesses and the market they operate within.
Potential answers could include:
Porter’s Five Explanation of the force How does this force impact
Forces businesses and the market they
operate within?
Provide clear examples
Threat of The threat of entry refers to how easy If a market is easy to enter then this
Entry it is for new businesses to enter the would mean the threat of entry is high,
market in focus. which is bad news for businesses that
already exist in the markets as it
presents a threat to their market share.
New businesses entering the market
may attract their customers, which in
turn can create price wars, reduce
competitive advantage, and decrease
overall profitability.
Buyer Buyer bargaining power refers to the If there is a limited number of buyers
Bargaining customers in the market who are i.e. not many customers in the market
Power looking to buy goods from businesses but lots of sellers offering the products
and how powerful they are. they are looking to buy, then supply
outweighs demand, customers are
likely to have lots of choice and
competition is likely to be intense in
the market.
This is not good news for the
businesses who operate within this
market as it is likely that overall
profitability will decrease if buyers
have strong bargaining power because
they may have to reduce their selling
prices to compete in price wars. Also,
they may have to increase the quality
of their products and services to gain a
competitive edge. This results in
increased unit costs or they may have
to invest heavily in marketing to attract
customers.
Threat of The threat of substitutes focuses on The greater the threat of substitutes,
Substitutes the options customers have and how the greater the threat to the business
easy it is for them to switch between and the less profitable it is likely to be.
alternatives. This is because the business may
have to reduce selling prices to and
improve the quality of their products to
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 retain customers or increase
investment in marketing to attract
customers away from the alternatives.
Supplier Supplier bargaining power relates to If businesses have a wide choice of
Bargaining the influence of suppliers on the suppliers in the market they operate
Power profitability of the businesses in the within, supplier bargaining power
market. would be weak, meaning businesses
can dictate negotiations and drive
costs down which is good for
profitability.
However, the fewer suppliers in the
market, the more powerful they are,
especially if the resources they supply
are relatively scarce.
If there are only a few suppliers in the
market, then they have what Porter
referred to as strong bargaining power
meaning they have more influence and
can increase their prices which
effectively increases the costs for the
businesses in the market, which in turn
reduces their competitive advantage
and profit margins.

Rivalry Rivalry examines how intense the
current competition is within the
market which the business operates or
wishes to enter.
As a business faces more competition,
it’s likely that their selling prices will
decrease and their investment in
marketing will increase to support the
business to compete, which will
typically lead to a decrease in overall
profitability.

2. Which force do you believe is the most influential in relation to the profitability of a business?
Ensure you justify your answer.

This question is based on the opinion of each student, they could choose any one of the five
forces, a clear justification of their choice is expected.

For example, a student may choose rivalry as the most influential force in relation to the
profitability of a business and give reasons such as: intense rivalry in the market results in more
alternatives and choice for customers, meaning businesses need to compete more intensely for
customers by reducing selling prices, improving quality, or increasing their marketing spend, all
of which is likely to reduce profitability.

3. Identify a market where buyer bargaining power is strong and one where buyer bargaining
power is weak. Make clear comparisons between the two markets and explain the factors that
have contributed to the buying power of customers in these respective markets.

This
For lotsquestion is Studies
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buyer
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bargaining power so answers will vary between individual students, a clear explanation of the
factors which have contributed to the buying power of customers in these respective markets is
expected.
4. Identify a market where competitive rivalry is intense and analyse how this impacts the
businesses within this given market.
Porter’s
This questionFive Howondoes
is based each force
the market whichimpact
studentstheindividually
businesses and profitability
identify within your
as having intense
Forces chosen market? Provide clear examples
competitive rivalry so answers will vary between students. A clear analysis of how the intense
Threat of rivalryThis
competitive taskthe
impacts is based on thewithin
businesses student’s individual
this given choice
market of market. Therefore, how
is expected.
Entry each force impacts the businesses and profitability within the chosen market will
Examples of markets varywith
andintense competitive
no suggested rivalry
answer is include the The
available. automotive
impact industry
of each and theon the
force
student’s choice of market is expected with supporting examples.
hospitality industry.

Buyer
Bargaining
Power

Threat of
Substitutes

Supplier
Bargaining
Power

Rivalry

5. Apply Porter’s Five Forces model to a market of your choice, providing examples of how each
force impacts the businesses and profitability within your chosen market.
Your chosen market:

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6. Extension activity: how quickly can you complete the Porter’s Five Forces wordsearch? If you
have finished the other activities before your peers, set the clock and give this a go.

Price wars Economies of scale Market share Competitive advantage

Profitability Rivalry Supplier Bargaining Power

Threat of Substitutes Buyer Bargaining Power Threat of Entry

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