PoRtEr FiVe FoRces

To measure how strong the industry's competitive force, we will use five force analysis. The five factors must act together to determine the nature of competition within an industry. What that the five competitive factor?...

Let me told you all. 

●Competition from rival sellers  
●Competition from potential new entrants
●Competition from producers of substitute products 
●Supplier bargaining power 
●Customer bargaining power

 Lets enjoys all the diagram below:

Diagram 1 shown how to determine the degree of competitive rivaly.

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 This table summarize barriers to entry. Every company will have at least one barrier, therefore very important to determine the threat of new entrants. The following table helps summarise the issues you should consider.

 

• Substitute product

A substitute product can be regarded as something that meets the same need
Substitute products are produced in a different industry –but crucially satisfy the same customer need.  If there are many credible substitutes to a firm’s product, they will limit the price that can be charged and will reduce industry profits.
As an example, consider the many substitutes that consumers now have to buying a newspaper for their news:

• Customer bargaining power

Several factors determine the bargaining power of customers which is:

• Supplier bargaining power

If the supplier forces up the price paid for inputs, profits will be reduced. It follows that the more powerful the customer (buyer), the lower the price that can be achieved by buying from them.
Suppliers find themselves in a powerful position when:

• There are only a few large suppliers
• The resource they supply is scarce
• The cost of switching to an alternative supplier is high 
• The product is easy to distinguish and loyal customers are reluctant to switch
• The supplier can threaten to integrate vertically
• The customer is small and unimportant
• There are no or few substitute resources available

Just how much power the supplier has is determined by factors such as: