Reference no: EM132479956

Micheal Porter's Five forces are-

1.Supplier power: An assessment of how easy it is for suppliers to drive up prices. This is driven by:

• the number of suppliers of each essential input the uniqueness of their product or service the relative size and strength of the supplier the cost of switching from one supplier to another.

2. Buyer power: An assessment of how easy it is for buyers to drive prices down. This is driven by: • the number of buyers in the market • the importance of each individual buyer to the organisation • the cost to the buyer of switching from one supplier to another. 

3. Competitive rivalry. The key driver is the number and capability of competitors in the market. Many competitors, offering undifferentiated products and services, will reduce market attractiveness.

4. Threat of substitution. Where close substitute products exist in a market, it increases the likelihood of customers switching to alternatives in response to price increases. This reduces both the power of suppliers and the attractiveness of the market.

5. Threat of new entry. Profitable markets attract new entrants, which erodes profitability. Unless incumbents have strong and durable barriers to entry, for example, patents, economies of scale, capital requirements or government policies, then profitability will decline to a competitive rate.

Strategy tool:

Strategy Tool

Tom wants to open a Pizza restaurant. As a strategy tool, he wants to analyze the strength of five forces to assess the competitive forces and provide quantitative rating as to the overall attractiveness of the target market space.