Porter’s Five Forces analysis is a framework for analyzing the competitive forces in an industry. These forces are:
- Threat of new entrants: This refers to the ease with which new competitors can enter the market.
- Threat of substitute products or services: This refers to the availability of alternative products or services that customers can switch to.
- Bargaining power of suppliers: This refers to the power of suppliers to influence the prices of the products or services that the business sells.
- Bargaining power of buyers: This refers to the power of customers to influence the prices of the products or services that the business sells.
- Intensity of competitive rivalry: This refers to the level of competition within the industry.
For example, if a company is considering entering the online retail market, a PESTLE analysis might consider the political impact of government regulations on e-commerce, the economic impact of consumer spending habits, the social impact of changes in consumer behavior, the technological impact of advancements in e-commerce technology, and the environmental impact of packaging and shipping.
A Porter’s Five Forces analysis of the same market might consider the threat of new entrants, such as Amazon and Walmart, the threat of substitute products or services, such as brick-and-mortar stores, the bargaining power of suppliers, such as manufacturers and distributors, the bargaining power of buyers, such as consumers, and the intensity of competitive rivalries, such as price wars and advertising campaigns.
