5 forces case study

Porter 5 Forces Model with Case Study: Comprehensive Post

Porter 5 Forces is a framework that helps business owners understand the competitive landscape of their industry and take steps to improve their position within it. This blog post will provide a detailed overview of the framework and its applications.

What is the Porter 5 Forces Model?

The Porter Forces is a strategic framework that is used to analyze the different forces that shape competition within an industry. This framework was developed by Michael E. Porter in his book, Competitive Strategy: Techniques for Analyzing Industries and Competitors. The Porter 5 Forces Framework is a great tool to study and analyze the attractiveness of an industry. In this blog, we will also develop a quantitative method for analyzing the Attractiveness of an Industry. Also, we will look into a detailed case study with an established company and analyze the attractiveness of an industry.

The Porter 5 Forces framework identifies five different forces that can shape competition within an industry. These forces are:

• The threat of new entrants : This force refers to the ease with which new firms can enter the market and compete with existing firms. If there are high barriers to entry, then new firms will find it difficult to enter the market and compete. This can lead to higher profits for existing firms.
• The bargaining power of buyers : This force refers to the ability of buyers (e.g., consumers) to negotiate lower prices from firms. If buyers have a lot of bargaining power, then they can drive down prices and reduce profits for firms.
• The bargaining power of suppliers : This force refers to the ability of suppliers (e.g., raw materials providers) to negotiate higher prices from firms. If suppliers have a lot of bargaining power, then they can drive up prices and reduce profits for firms.
• The threat of substitutes : This force refers to the availability of substitutes. Also, from a consumer loyalty perspective, how difficult it be for a new substitute to knockoff the incumbent
• Competitive Rivalry : This depends on the competitive rivalry that exists inside the business . Competitive rivalry comprises how closely the incumbents fight with each other. The fight can be represented by the similarity of products, Focus on Advertisement and Promotion, and strategies of operational excellence. On the other hand, a fiercely competitive environment ensures better policies to retain human resources and talent. 

How to apply the Porter 5 Forces – A Quantitative Method

In this model, we will rate each parameter into the scoring of 1-5. Criteria for 1 and 5 are defined in the table below:

After we have valued these parameters, we need to take a Product of all the scores and the inferences are provided below. Please note, these are just for reference, however, a higher score definitely represents higher relative attractiveness of the industry

We will discuss the case of Coca-Cola, a Giant in the beverage manufacturing industry

The Threat of New Entrants: There are significant barriers to entry into the industry specifically on the scale at which Coca-Cola Operates. Coca-Cola has 1000s of bottling plants and thousands of distribution centers to match its scale. Hence, the Threat of New Entrants is Significantly lower.

We will rate it as a Solid 5

The Bargaining Power of Buyers: Buyers Exude significant loyalty. Also from an option point of view, they are limited to Pepsi. Hence, the bargaining power of the Buyers is significantly limited by the distribution reach of Coca Cola

We will rate it as a 4.5

The bargaining power of suppliers: The Suppliers of Coca-Cola are represented by bottlers and plastic bottle suppliers. There is no significant technology differentiation and the cost of Switching is relatively easy

The threat of substitutes: The only substitute which can match the prowess of Coca-Cola is Pepsico. Hence There are not a lot of Substitutes available in the market.

Competitive Rivalry: Last but not least the competitive rivalry between Pepsico and Coca-Cola is very high. They match each other and compete in almost all markets and segments making them fierce rivals in operational excellence, pricing, and human resource retention.

We would rate it as a 4

The Net Aggregate Score for Coca-Cola = 5*4.5*5*4.5*4 = 2025

Hence, going by the aggregate score, we would consider Coca-Cola’s attractiveness in Industry to be Very High. The same is reciprocated by the fantastic financial performance and the way it defends the territory to kill new entrants. This is also represented by the shareholder’s value it has created over the years

What are some benefits of using the Porter 5 Forces?

There are several benefits to using the Porter Forces. First, it helps businesses to identify and understand the forces that are affecting their industry. This information can then be used to develop strategies to compete effectively in the marketplace.

Second, the Porter 5 Forces can help businesses to identify opportunities and threats in their industry. For example, if a business knows that there is a high level of competition in its industry, it can use this information to develop strategies to improve its competitive position.

Third, the Porter 5 Forces can help businesses to understand how changes in the marketplace will affect their business. For example, if a new technology is developed that will reduce the demand for a particular product, a business can use this information to adjust its production plans accordingly.

Are there any drawbacks to using the Porter 5 forces?

Porter 5 Forces Model is an useful tool for analyzing the competitive environment in which a business operates. However, there are some limitations to using this tool.

One of the main limitations is that it only considers the external environment. It does not take into account internal factors such as a company’s resources and capabilities. Additionally, Porter’s Five Forces only looks at the short-term and does not consider long-term changes or trends.

Another limitation is that the model is based on static concepts. This means that it does not take into account the fact that businesses are constantly changing and evolving. Additionally, it does not consider the role of government or other external factors that can impact a business.

Despite these limitations, Porter’s Five Forces is still a valuable tool for analyzing the competitive environment . It can help businesses to identify opportunities and threats and to make decisions about how to compete in their industry.

Porter 5 Forces is a powerful tool for business analysis and strategy development. It can help you to understand the competitive landscape, identify opportunities and threats, and develop strategies to build a sustainable competitive advantage. If you’re new to Porter’s Five Forces, I hope this blog has given you a good introduction to the framework and its applications. If you’re already familiar with it, I hope you’ve found some new insights or ideas for using it in your own work. Thanks for reading!

Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page

Leave a Comment Cancel Reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

• Strategy Explained
• Business Strategy
• Creating a Successful Strategy
• Corporate Strategy
• The Role of Leaders
• Related Topics

The Five Forces

• Strategic Positioning
• The Value Chain
• Operational Effectiveness vs. Strategy

Threat of New Entrants

Bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, rivalry among existing competitors.

• Competitors are numerous or are roughly equal in size and market position
• Industry growth is slow
• There are high fixed costs, which create incentives for price cutting
• Exit barriers are high
• Rivals are highly committed to the business
• Firms have differing goals, diverse approaches to competing, or lack familiarity with one another

Key Industry Structure Concepts

Every industry is different, but the underlying drivers of profitably are the same in every industry.

The Five Forces determine the competitive structure of an industry, and its profitability. Industry structure, together with a company's relative position within the industry, are the two basic drivers of company profitability. 

Analyzing the Five Forces can help companies anticipate shifts in competition, shape how industry structure evolves, and find better strategic positions within the industry. 

How the Five Forces Work

Industry Structure is Dynamic

Industry structure changes over time, and is not static. Over time, buyers or suppliers can become more or less powerful. Technological or managerial innovations can make new entry or substitution more or less likely. Changes in regulation can change the intensity of rivalry, or affect barriers to entry. Choices by competition, such as new pricing or distribution approaches, can also affect the path of industry competition.  

Five Forces analysis is essential to anticipate and exploit industry structural change.

Related Resources

• 01 Jan 2008
• Harvard Business Review

The Five Competitive Forces That Shape Strategy

• 16 Dec 2012
• Harvard Business School Publishing

Understanding Michael Porter: The Essential Guide to Competition and Strategy

• 09 Sep 2008

On Competition, Updated and Expanded Edition

View All Related Resources

Porter's Five Forces (2024): The Definitive Overview (+ Examples)

Every business strives to prevent its competitors from stealing its profits. With today's fierce competition in almost every industry, it's not a question of if, but it’s a matter of how...

Porter’s 5 Forces is a straightforward strategic framework that can help you answer these questions and reduce the share of profit leaking to your rivals:

• What forces beyond direct competitors shape your industry?
• What makes your industry profitable?
• Where can you find a position amongst your competitors that is profitable and difficult to attack?

You can use Porter’s Five Forces Model to take a step back, analyze and fully understand your competitive environment before you make any strategic decisions.

In this article, we will give you an overview of Porter’s Five Forces competitive analysis framework, explain key pitfalls you need to avoid during industry analysis, give you examples of the model in real-world, and show you possible strategies you can undertake to create a winning position in your industry and among your competition.

🎁 Bonus! We will also provide you with free templates to help you implement this framework to strengthen your business strategy .

⚠️ Avoid Porter's Pitfall! This framework is a strategic compass, but true value comes from action. Cascade Strategy Execution Platform bridges the gap, turning Porter's insights into actionable plans. Book a call with a strategy expert and see real results from your Porter analysis.

• Porter’s Five Forces are Threat of new entrants, Bargaining power of buyers, Bargaining power of suppliers, Threat of new substitutes, and Competitive rivalry.
• This framework helps strategists understand what makes an industry profitable and provides insights needed to make strategic choices.
• It’s applicable to any industry and company size.
• Pros: A strategic tool that gives you a complete picture of what drives profitability and helps you identify disruptive trends early on.
• Cons: This tool is outside-in and requires a great deal of research and analysis to uncover new information.

What Are Porter's 5 Forces?

Porter's Five Forces model is a strategic framework that helps to identify and analyze five forces that affect a company’s profitability in any given industry. These five forces are:

• Threat of new entrants
• Bargaining power of suppliers
• Bargaining power of buyers (customers)
• Threat of substitutes
• Competitive rivalry

Porter’s Five Forces model is a critical element of strategic analysis that helps companies decide how to shape the balance of competitive forces to maximize profitability.

Based on the framework, companies should position themselves where forces are weakest, exploit changes in the forces, and design those forces to their advantage (Porter, 2008).

Advantages Of Porter’s Five Forces Model

The advantages of Porter’s 5 Forces model are:

• Organizations can learn how profit is divided among the five forces.
• It enables organizations to identify which players are in control and set rules.
• It provides company strategists with insight and a baseline to evaluate the company's strengths and weaknesses.
• It provides a holistic overview of any industry and helps strategists identify the most important factors that can affect their position in the industry.
• It helps strategists to think more comprehensively about the industry structure and discover non-obvious opportunities that can also attract higher investments and affect the company’s future growth.

Porter's 5 Forces: In-Depth Overview

An analysis of all five competitive forces gives you a comprehensive view of the factors affecting profitability in your industry. When you understand each force, you can formulate a strategy that will allow the company to better cope with competitive forces and increase profit potential. Let's take a closer look at each force:

1. Threat of New Entrants

When an industry starts becoming profitable, it will entice new entrants. If the barriers to entry are low, new entrants can easily capture market share and threaten profitability.

New entrants undercut prices and offer valuable alternatives to what your industry currently provides.

A practical example of a new entry and high threat to existing players is Apple’s entrance into the music distribution industry with the iPod. Apple entered into a new market, stole market share from existing players, and completely changed the way we consume music and audio content today.

On the other hand, if barriers to entry are high, it’s much harder for new entrants to threaten your industry’s profitability.

According to Porter, there are 7 main sources that influence the height of entry barriers:

• Supply-side economies of scale: Production at higher volumes and low costs per unit force new entrants to come in on a large scale or at a cost disadvantage.
• Network effect: Buyer’s willingness to pay increases as the number of buyers or sellers for the business grows. Customer loyalty or a buyer's preference for a bigger "network" discourages new entrants by limiting buyers’ willingness to buy from someone new.
• Switching costs: The higher prices/costs a customer has to pay to switch from one supplier to another, the higher the entry barrier will be.  
• Capital requirement: The entry barrier can be significant for new entrants on account of the hefty financial investment required. However, investors can provide new entrants with the required capital if the industry returns are high and lower the entry barrier.  
• Unfair advantage: Industry leaders have cost or quality advantages derived from resources that are hard to copy. An example would be patent technology, exclusive access to raw materials sources, a strong brand identity, or a favorable geographical location.
• Unequal access to distribution channels: Considering the power of existing players, it might be difficult for new competitors to break into existing distribution channels. As an alternative, companies typically bypass traditional distribution channels or create new ones. An example is low-cost airlines that started selling tickets on their own websites.
• Government policy: Government policy can lower or increase entry barriers for new entrants. Licensing requirements, for example, can increase entry barriers. In contrast, subsidies can make entry easier.  

Questions you can use during analysis:

• How expensive would it be, and how long would it take a new competitor or startup to enter your market?
• Is there strong customer loyalty in your industry? Would it be difficult for a new competitor to woo customers away from your products or services?
• Are there any additional barriers to entry a new player could encounter (e.g. regulation, intellectual property, access to distribution channels, etc.)?
• What’s your industry structure like? How strictly is it regulated?
• Is your key technology protected?

2. Bargaining Power of Suppliers

Suppliers offer your industry the needed inputs to operate (e.g. components, materials, and services). When the bargaining power of suppliers is high, there’s a strong chance your suppliers could set higher prices for those inputs or reduce quality without retaliation.

If you have a number of suppliers to choose from, their bargaining power is likely low, so you will not have a problem switching suppliers if needed.

As an example, let's take a look at the automotive industry.

Volkswagen Group's suppliers have limited bargaining power due to VW's global presence with suppliers scattered around the globe. On top of that, Volkswagen has at least 1 or 2 backup suppliers for each part and can shift demand between them.

On the contrary, many automotive suppliers manufacture only a specific part and are heavily dependent on the industry. These dynamics of the automotive industry put Volkswagen in a superior position while its suppliers have relatively low bargaining power.

If you don’t have the option to choose between a number of suppliers, there is no substitute for what the supplier provides, or the switching cost of suppliers is high, they will have stronger bargaining power, and you will have to rethink your business strategy.

• Who are your key suppliers?
• How many competent suppliers does your company have to choose from?
• How many alternative suppliers can you find?
• How difficult or expensive would it be to change your suppliers?

3. Bargaining Power of Buyers

In Porter's Five Forces model, buyers are your customers. At the expense of industry profitability, strong buyer power can lower prices, pit rivals against each other, and demand higher quality or service.

The power of customers is higher when they are few in number and have many sellers to choose from. Beyond this, if a large portion of a seller’s revenue is determined by a handful of buyers, those buyers will have more leverage.

Switching costs should also be considered when determining the buyers' bargaining power.

• How many potential buyers are in your industry compared to the number of sellers?
• Does a handful of buyers make up the majority of your revenue?
• What is the size of the orders you receive?
• How easy would it be for your buyer to switch from one seller to another?

4. Threat of Substitute Products or Services

All firms in an industry are competing with other industries that make substitute products or services. An example is a messaging app that is a substitute for e-mail. Or an airline website replacing travel agents with its own ticket booking system.  

If buyers can satisfy their needs with a different product or service from an alternative industry, that will put a lid on how high your industry can set its price.

The more attractive a substitute, the firmer the lid on industry profits. If there are many substitutes that can perform a similar function as your product or service, then the threat of substitutes is high.

If there are few substitutes that provide the same function as your product or service, the threat of substitution is low.

• How many substitute products/services are in your industry?
• How similar are those products/services from a functional standpoint?
• What differentiates your products/services from those substitutes?
• Are those products/services affordable?
• What is the buyer’s cost of switching to a substitute product? Is it low-cost or high-cost?
• Are you able to offer a new product or service that can become a substitute for a market leader? If so, what is it?

5. Competitive Rivalry

Although rivals are subject to the same industry forces as yourself, the force of competitive rivalry is often the largest determinant of an attractive industry since it is affected by the four previous forces. In order to capture their share of the market, rivals will compete on price, quality, service, marketing spend, etc.

Competitive intensity is the highest when your buyers have plenty of alternatives, there is little service or product differentiation between rivals, and when industry growth is slowing. If the buyer can choose from a fair number of competitors, the buyer can start bidding wars and reduce profits.

When there is little differentiation between rivals, your product or service will be perceived as a commodity, and the buyer will purchase solely on price.

If an industry’s growth is slowing, the existing firms will be in a fight to maintain their piece of the market share. We've written extensively about VRIO Analysis that can help you find your competitive advantage and then turn that into a sustainable competitive advantage.

• What is the number of competitors in your industry?
• Who is your biggest competition?
• What makes your product/service different from your rivals?
• Are there any barriers that would prevent your customers from switching providers? If so, what are they?
• Is your industry shrinking or growing?

Porter’s 5 Forces Examples

The following examples illustrate how Porter’s Five Forces Analysis might be applied in practice.

Five Forces Analysis in higher education

The following is an example of Porter's Five Forces Analysis applied to higher education:

Under each force, you should evaluate the threat, ranging from low to high. As shown in this example, the most important threats, in this case, are: bargaining power of buyers , threats of substitutes , and competitive rivalry .

Five Forces Analysis in the airline industry

Here’s an example of an analysis for the airline industry that was developed and framed for the International Air Transport Association (IATA) by Michael E. Porter himself:

As you can see in this example, there are times when you will need to prioritize and make a decision. If you detect high threats in all 5 forces, think about where you need to focus to make the most impact.

Five Forces Analysis in the music industry

Spotify has completely disrupted how the music industry functions and how people consume music. But, as we signaled before, the competitive environment is dynamic, and you need to iterate on your Porter Five Forces Analysis to understand changes in your position.

In Spotify’s example, the highest threats are:

• Bargaining power of suppliers : music labels and artists hold significant control over licensing agreements and royalty rates.
• Competitive rivalry : streaming platforms such as Apple Music and Amazon Music intensify the pressure on Spotify to differentiate its offerings and retain subscribers.

Five Forces Analysis in retail: Walmart

In today's dynamic business landscape, the retail industry experiences constant changes in market dynamics and consumer preferences. Even for a dominant player like Walmart , these changes bring both new threats and opportunities.

Walmart operates in an industry characterized by intense competitive rivalry , as it faces strong competition from both traditional retailers and e-commerce giants such as Amazon. This rivalry puts pressure on Walmart to continuously innovate, offer competitive prices, and provide a superior shopping experience to maintain its market share.

Five Forces Analysis in transportation: Uber

Uber , the trailblazer in the transportation industry, has revolutionized the way people get around and explore cities. As the industry continues to evolve, it presents a dynamic mix of challenges and opportunities for Uber's growth and success.

Uber faces threats from the bargaining power of buyers (riders). With strong competition from ride-hailing alternatives, traditional taxis, and high car ownership, riders have numerous options to choose from, giving them significant influence over pricing and service quality.

Uber also encounters fierce competitive rivalry , along with the rise of numerous locally-focused new entrants . This dual challenge has the potential to weaken Uber's financial standing and allow regional players to capture market share in their specific areas.

Weaknesses Of Porter’s Five Forces Model  

These are some possible limitations and pitfalls, as noted by Michael E. Porter himself and other experts:

• Not putting in enough effort to discover and understand the ‘why’ behind observations.
• Lack of engagement with stakeholders during the competitive analysis can result in obstacles that could be prevented from the get-go.
• Not understanding the goal of Porter’s Five Forces Framework. The goal is to use insights to formulate a business strategy, not to declare whether the industry is attractive or not.
• Strategies fail because managers and strategists define the industry in which the competition takes place too broadly or too narrowly. On top of that, strategists shouldn’t ignore the possibility of shifting industry boundaries.
• Some authors and sources say that innovation should be considered one of the forces that drive industry competition. However, Porter argues that technology and innovations are fleeting factors that are not enough to make an industry attractive or unattractive.

There are also many resources criticizing that the 5 Forces model is a static tool. The main argument is that the framework gives a snapshot of competitive forces at a single point in time. However, Porter never stated that these five forces remain unchanged. Strategists have to periodically reassess five forces as well as keep an eye out for creative approaches taken by their existing or new competitors .

TIP: Porter’s 5 Forces model is an outside-in-facing tool that analyzes only external factors that impact a company’s profitability. You can do a comprehensive strategic analysis using additional tools and frameworks, like SWOT analysis , PESTLE analysis , Blue ocean strategy , or Value chain analysis .

📚 Recommended read : 6 Competitive Analysis Frameworks: How to Leave Your Competition In the Dust

How To Apply Porter’s Five Forces Analysis?

Using Porter's 5 Forces, you should start to understand the forces that shape your industry. The next step is to identify how your company is going to compete and formulate a competitive strategy.

Ideally, you want to sit in a position where you can balance the 5 Forces and maximize your profit. The key question to answer here is how you are going to achieve a competitive advantage that will put your organization in a winning position.

Porter developed three generic strategies that can be used to create a defendable position and outperform competitors. These strategies are cost leadership, differentiation, and focus on a particular niche .

Here’s a quick overview of each:

Cost Leadership Strategy

Cost leadership is a strategy that focuses on reducing the costs involved in providing a product or service. By running a lean operation and reducing costs across different departments, you’ll maintain healthy margins and profits.

Differentiation Strategy

A differentiation strategy focuses on providing a product or service that is perceived as being unique and hard to replicate. Buyers won’t find anything like your product or service in the market allowing you to charge higher prices.

Focus Strategy

A focus strategy looks at serving a specific target market better than anyone else in this industry. By acquiring a deep understanding of your specific customer, you’ll be able to serve your customers more effectively and efficiently than the competitors who are working across the entire industry.

Don't Get Stuck In The Middle

Which strategy is your organization working towards? It’s not uncommon for organizations to successfully pursue more than one strategy, especially if your industry is growing and profitable.

However, as industries mature, the companies that are unclear about their strategy often see their profits dwindle. When companies fail to focus their efforts on any one of these 3 strategies they are, as Porter calls it, “stuck in the middle”.

Companies that are stuck in the middle lack the investment and resolve needed to be a cost leader, the unique product offering to pursue differentiation, and the attention required to pursue focus… in the long run, it’s a losing strategy.

If you are stuck in the middle, it’s important to start aligning your company with one of these strategies. Not sure which strategy to pick? Choose a strategy that is hardest to replicate and that is best suited for your company's strengths.

If you’re interested in easy-to-follow methods for identifying your strengths, check out our internal analysis article that covers different tools that can help you in the process.

Interestingly, the idea of focusing on a strategy is omnipresent in the realm of strategic planning .

Whether you’re reading Michael Porter’s Competitive Strategy, Stephen Covey’s 4 Disciplines of strategic execution (BHAG), or Jim Collins’ Good to Great (Hedgehog Concept), keeping an acute focus on one strategy is vital for success.

👉🏻 Get the insights and learnings of your Porter 5 Forces analysis into an execution-ready strategic plan. See how Cascade can help you achieve tangible results.

Porter’s 5 Forces Template

To streamline your analysis, we’ve created templates that’ll help you use Porter’s 5 Forces Model very easily.

Cascade Template

This free template is easy to use and comes pre-filled with examples to inspire your analysis, but it can be tailored to fit your organization’s needs.

The best part is that once you implement Porter’s Five Forces Framework with this template in Cascade , you’ll be able to follow up on your objectives and goals distilled from the analysis in the same platform to ensure you’re on track. No need to switch between multiple tools and risk the possibility of losing context!

👉🏻How to use it? Just click on this link and create a free forever account in Cascade. That’s it!

PDF Template

Although we highly recommend the Cascade Template, we know there are some PDF lovers out there. If you’re one of those, we have a PDF Porter’s 5 Forces Template just for you!

As you can see, this is the typical template that is used for this framework. You can download it here and add your organization’s information.

Focus + Strategy Execution = 🏆

Once you’ve gone through analyzing your company’s position with Porter’s Five Forces Model, it’s time to take those learnings and insights and put them into action!

But wait! Before going into formulating your strategic plan , think about the metrics that you want to achieve and start building your plan backward from there. We call this “ reverse engineering your business ,” and the best part of this approach is that it ensures you’re focused on the metrics that matter.

Once you know those metrics, start crafting the KPIs, projects, objectives, and focus areas that you’ll need to work on to get to those key metrics you set. This is basically the process of creating your strategic plan.

📚 Check out our detailed guide that will take you step-by-step into writing a successful strategic plan !

💡 Pro tip : To prevent being “stuck in the middle,” remember to keep your strategy top-of-mind at all times. For example, if you’re looking to pursue a cost leadership position, make sure you create goals focused on cost reduction and growing market share.

One final recommendation from our team of strategy experts: know that you cannot do this alone . Change requires buy-in from your people. Aligning your strategy across your organization can be difficult - it’s even more difficult for everyone to keep strategy top-of-mind.

With Cascade , you can create and execute your strategy rooted in reality to ensure the implementation of your Porter’s 5 Forces Analysis findings and initiatives is successful. You can invite your teams to collaborate and ensure company-wide alignment like never before. You can also leverage integrations to import data from multiple business tools.

Cascade allows you to connect your metrics, initiatives, and investments to your business performance and make better decisions, faster .  

Sign up today for a free forever plan or book a guided 1:1 tour with one of our Cascade in-house strategy execution experts.

FAQs About Porter’s Five Forces

What are the 5 elements in porter’s 5 forces .

The 5 elements in Porter’s 5 Forces are the Threat of new entrants, Bargaining power of buyers, Bargaining power of suppliers, Threat of new substitutes, and Competitive rivalry.

Is Porter’s Five Forces model still relevant today? 

Porter’s Five Forces model remains relevant despite being on the scene for more than 40 years. It has its own limitations and can’t be used as a standalone tool but it’s an evergreen strategic tool that helps strategists make better decisions.

Who developed the model?

Porter’s 5 Forces model was developed and published by Michael E. Porter in 1979. The model was later updated by the author itself in 2008 and published in Harvard Business Review.

What is the difference between Porter's Five Forces and SWOT Analysis?

The main difference between Porter's Five Forces and SWOT Analysis is the fact that Porter's model analyzes only external forces, while SWOT Analysis takes into account both internal and external factors.

Porter, M. E. " How Competitive Forces Shape Strategy ." Harvard Business Review 57, no. 2 (March–April 1979): 137–145.

Porter, Michael E. " The Five Competitive Forces That Shape Strategy. " Special Issue on HBS Centennial. Harvard Business Review 86, no. 1 (January 2008): 78–93.  

Popular articles

Viva Goals Vs. Cascade: Goal Management Vs. Strategy Execution

What Is A Maturity Model? Overview, Examples + Free Assessment

How To Implement The Balanced Scorecard Framework (With Examples)

The Best Management Reporting Software For Strategy Officers (2024 Guide)

Your toolkit for strategy success.

Training tools for developing great people skills.

• Online Assessments
• Online Courses
• Student Access
• About the RTL
• All Courses
• RTL Complete Collection
• Career Development
• Change Management
• Communication
• Conflict & Stress
• Customer Service
• Diversity & Inclusion
• Emotional Intelligence
• Listening Skills
• Negotiation
• Performance Management
• Problem Solving
• Project Management
• Selling Skills
• Supervisory Skills
• Team Building
• Time Management
• Team Member
• Basic Style
• Accountability
• Conflict Resolution
• Creativity & Innovation
• Critical Thinking
• Decision Making
• Engagement & Retention
• Performance
• Personality Styles
• ROI of Learning
• Stress Management
• Trust Building
• Virtual Work
• Work-Life Balance
• Workplace Conduct
• Paper Assessments
• Simulations
• Reproducible

Porter's Five Forces: Definition, Examples & Case Studies

We're going to focus on something called Porter's Five Forces. This is a useful strategy created by Michael E. Porter. It helps businesses figure out who their competitors are. This strategy isn't just about knowing your rivals. It also asks for a deep look at the power of suppliers and buyers, how competitors act, what new competitors could pop up, and what other options are out there.

We focus on five main things: how fierce the competition is, how powerful suppliers are, how much customers can change things, if there are other options, and if new competitors can come up. All these things form how an industry looks and lead businesses in how they grow and stay strong.

All business plans have problems they need to solve. For example, we dig into the issues with Porter's Five Forces to give a fair view of how good and valuable it is in our fast-changing business world. Our work includes real examples and case studies to show how Porter's Five Forces works in various businesses. So, let's dive in!

• Identify personal leadership styles
• Capitalize on style strengths
• Minimize style trouble spots

Table of Contents

What are porter's five forces, force #1: competitive rivalry, force #2: supplier power, force #3: buyer power, force #4: threat of substitution, force #5: threat of new entry, applying porter's five forces, limitations of porter's five forces, enhancing porter's five forces with other models.

In the business world, knowing Porter's Five Forces is a must.  Michael Porter, who taught at Harvard Business School , created it. It gives us a clear view of how an industry is built and how competition works.

If you're left asking "Five Forces of  What ?" you're not alone. To make the name easier to understand, you could almost call it "Porter's Five Forces of  Business Competition " or "Porter's Five Forces of  Industry Attractiveness Analysis. "

The tool has five essential parts:

• Competitive Rivalry
• Supplier Power
• Buyer Power
• Threat of Substitution
• Threat of New Entry

To understand these parts better, you need to look at each of them closely, which is precisely what we will do!

At the heart of Porter's idea is  Competition , an essential spark for businesses planning to get ahead. You can see this perfectly in the big companies we know, like when Coca-Cola fights it out with Pepsi in the soda world or Apple does the same thing with Samsung in the phone market.

These fights in business push new ideas, make products better, and sometimes even start big battles over who can sell more. That usually turns into a fight over who can sell the cheapest or who can shout the loudest in their ads. Porter put a lot of importance on knowing how hard the fight will be and what ground you're fighting. All of this knowledge helps make a plan that gives you an edge that will last.

No denying, clashes like these are serious business. It's like a boxing match where heavyweights slug it out to win the gold, and in the process, they push each other to get better and better. Imagine if Coca-Cola said,  "No way, we're not going to bother beating Pepsi."  We wouldn't have the choice or quality we have today. That is precisely why Porter thought knowing about your rivals and where you stand is so important. It helps you get that winning punch in that nobody else has seen.

The intensity of these fights and the ground they are fought on shape the way strategies are built. At the end of the day, these strategies give one company an advantage over the other. Remember, it doesn't matter how big or small the advantage is, as long as it's there. Even if it gives you just a little bit of an edge, it can make all the difference. This edge, this advantage, is precisely what Porter believed every business needs to stay ahead.

Supplier power can change how much money an industry can earn. For example, look at the airplane industry. Mostly,  plane sales are controlled by a few leading suppliers , like Boeing and Airbus. Since there aren't many options, these guys have a lot of influence when they talk to airlines. Often, industries end up in difficult situations because their suppliers have a lot of control. Profits might decrease, and they might even have to make customers pay more. For the most part, understanding how this power works can help companies make their plans. Maybe they think about working with more suppliers or decide to put money into owning more of the supply chain.

Now, let's think about this. If suppliers are  too  powerful, it can lead to less profit. Industries might end up stuck with slim profit margins. They might even have to pass extra costs onto customers. It sort of puts things into perspective, doesn't it? That's why understanding this power balance is essential. It can help companies decide whether to diversify their supplier network or invest in more supply chain ownership.

Big businesses, such as large stores selling consumer goods, show a lot of buyer strength. Take Walmart as an example. This company strongly affects its suppliers. It even sets its own rules and prices due to its significant market presence.

Did you know that Porter had heavy conversations about the effects of strong buyer power? He thought this power could result in lower prices and better service levels. These factors can directly affect how profitable an industry is. So, how can companies manage this strong buyer power? Well, they can make their products special or expand their customer base.

In the world of technology, changes can pose a real problem. We're talking about something called the Threat of Substitution. It's common in many businesses. Just take a look at how digital streaming services have shaken things up. Think about Netflix or Spotify. These have made waves in the traditional media and entertainment industries. You see, the control of prices and profitability can be rocked by this danger.

Companies use many techniques to stand up to market competition. A simple but useful way is to throw fresh ideas into their products, making them catch your eye in a crowd. Making it expensive for customers to swap their product with another company's is another good trick. Keeping up with new trends is a helpful answer, letting companies stay important in a world that changes quickly. Combining these plans can reduce possible dangers.

The danger of newcomers is powerful in fields where there's not much to stop someone new from jumping in. A perfect example is the food and drink business, where pretty much anyone can open new cafes and restaurants quickly. On the other hand, let's take the phone and internet business, which require a lot of money and have many rules and regulations. These things form a sort of wall that keeps new competitors out.

Porter wanted to make clear that areas with big walls like these to entry have less competition. They may even have a better chance of making more money. Businesses in these areas put a lot of work into keeping these walls high. They use things like patent rights, economies of scale (basically, the idea that things get cheaper the more you make), or even how much people love their brand to guard against any new competition.

Look at using these actions to help you get your selling plans just right.

Supplier Power.  When working with the people who give you your supplies, take a close look at who these people are. If you don't have many choices for suppliers, they can have too much control, which could upset your power to strike a good deal. Think about the specialness and how much you need the supplies you are given. If the items they give you are hard to find and very important, your ability to make good deals might be limited. One way to help with this is to find more suppliers to work with.

Buyer Power.  On the buying side of things, pay close attention to what your buyers want. Buyers who purchase your products in considerable amounts or have a lot of other similar options can push you to lower your prices. To balance this, consider how much your customers trust you and the unique parts of your product. Getting to know your customers well - what they like, how they buy things, and what other options they have - is vital to keeping an eye on the power that your buyers have.

Competitive Rivalry.  Shifting our focus to competition could be interesting. The level of fighting between businesses in your market plays a significant role in how much money you make. Check out the number and skill level of your competitors. Are many businesses offering the same things as you, or is the market quite varied? Lots of competition might make you change your prices or start advertising more. Think about how hard it is to leave the market and what will happen if you do since these factors shape the overall strength of your market.

Threat of Substitution.  Next, consider how easy it can be for your customers to replace your product or service with something else. If other options are easy to get and look good (either in price or quality), how well you are doing in the market could be in danger. Improving your products, offering loyalty rewards, or improving how you talk to customers could help reduce this risk.

Threat of New Entrants.  Lastly, the risk comes from new competitors, using this as a gauge to see how easy it would be for new businesses to enter your market. Things like needing a lot of money, rules and regulations, and the trust of customers can make it hard for new businesses to get started. If it's easy for new businesses to join the market, you need to be flexible and creative to keep your advantage over others.

Using these Five Forces from Porter in your business can help you make strategies that work with your strong points, lower risks, and grab chances in the challenging market. Doing this type of planning helps with making quick, on-the-spot decisions and also for long-term strategic direction and positioning.

The approach we're looking at is helpful, but it's not perfect. Porter's Five Forces is based on the old-school way of thinking about business competition, which is why it can be less effective in today's fast-paced business world. If things change too fast, a company might struggle to keep up using this model.

Change is always a factor.  Sometimes, technological changes or unexpected events can throw a curveball at an industry. Guess what? Porter's model can have difficulty seeing these shifts coming because it doesn't change over time. One big issue is that the model doesn't consider how different factors interact and could affect competition significantly.

Porter's Five Forces takes a pretty black-and-white approach . Do we have a lot of threats or a little? What about our competitors or our suppliers? It doesn't consider areas in between, which is often where you'll find key strategies taking shape. This could get in the way of making good strategic decisions.

Another problem with the model is that it mostly looks at outside factors , like competitors and customers. It doesn't look at how things going on inside the company - such as the company culture or how efficient its operations are - can affect how competitive it is.

The model also doesn't consider how important partnerships can be in today's business world . For example, there are often mergers and partnerships that can completely change competitive landscapes.

While it's got its limits, Porter's Five Forces is still a big part of planning business strategies.

Your plan review shouldn't just stop with Porter's Five Forces, like how a toolbox isn't complete with only a hammer. Using other models like this can help you understand more. Porter's Five Forces become even stronger when paired with a SWOT analysis. That looks at things like strengths and weaknesses inside your business. This is helpful because it makes the information from the five forces even clearer.

Pairing these two tools can help us take a better look at a business. It's like using the SWOT for a self-check and Porter's Forces to look at what's happening outside the business. You can find more about this helpful duo online.

Now, talking about getting bigger and better, there's the  Ansoff Matrix . This model helps businesses decide if they should work to sell more in their current market, make new products, explore new markets, or try completely different things based on who they are and what they are selling now.

Linking the Ansoff Matrix and Porter's Five Forces offers many details about your rivals and a clear direction for plans to grow. There's more helpful info about this power couple online.

The Balanced Scorecard  shouldn't be left out. It works well with Porter's Five Forces. It focuses on things like what's happening inside the business, how you deal with customers, learning and growth chances, and how the money is doing.

Another inside view is given by  VRIO . Together, these two can give a strong review of what your business is good and bad at compared to your rivals.

The five concepts by Porter are quite key in the world of business. Simply put, they act as a helpful kit for helping us understand who we're up against. It's a lot like a multi-tool for business plans, making it easier for us to understand changes in the market.

The strength of this approach is in its ability to scan different areas where companies compete. When a business looks at the power of customers, it can know if customers hold a lot of influence. After that, it can develop strategies to keep customers content and lower the rate of clients leaving. Trust me, in many cases, it's cheaper to hold onto existing customers than it is to look for new ones.

To further enhance your leadership and management skills in this complex business environment, consider exploring  "What's My Leadership Style" from HRDQ .

"What's My Leadership Style" is a comprehensive management development tool and leadership style assessment. It helps you identify your leadership style—be it direct, spirited, considerate, or systematic—and refine your approach to effectively lead in various situations. This resource is an excellent addition for anyone looking to augment their leadership skills in conjunction with understanding market dynamics through Porter's Five Forces.

Learn more about your leadership style and how to apply it effectively in your organization. Visit the  What's My Leadership Style  product page for more information. We hope to be a part of your journey of becoming a more versatile leader, capable of navigating the ever-changing business seas with confidence and skill.

Leave a comment

Comments must be approved before appearing

* Required fields

About our author

Bradford r. glaser.

Brad is President and CEO of HRDQ, a publisher of soft-skills learning solutions, and HRDQ-U, an online community for learning professionals hosting webinars, workshops, and podcasts. His 35+ years of experience in adult learning and development have fostered his passion for improving the performance of organizations, teams, and individuals.

Related Blog Posts from HRDQ

Elevating the mental health of leaders: optimizing their unlimited worth.

HRDQ-U presents a live webinar event on Wednesday, October 19, 2022 at 2:00pm EST. Brought to you by HRDQ-U and prese...

• View this post

Intros and Icebreakers for Amazing Training Sessions

First impressions matter, whether you’re walking into a social gala or beginning a new training seminar. How you open...

What Is the Player-Coach Model? Definition, Tips, and More

When someone with a long history in their job starts coaching their friends – instead of just playing – it reflects t...

What is Bureaucratic Management Theory, and How Do You Use It?

Big companies are really good at keeping everything running smoothly. They have a way of handling tasks that organize...

A Guide to Visual Versus Auditory Learning Preferences

If you want to improve your work training, you'll need to think about how people like to learn, like by watching or l...

Can You Apply Piaget's Theory of Education to Business?

Jean Piaget's reach learned how kids form the knowledge of the world they live in. Thanks to him, we have a whole new...

What Are the Core Ideas of Dewey's Education Theory?

John Dewey turned how we learn, promoting practical involvement in education. Forget the old days of just storing fac...

The Ultimate Guide to Describing Your Company Culture

Why do job ads grab our attention? Why do we get all excited when recruiters reach out? It all comes down to how a co...

Legacy Leadership: What Is It and How Does the Model Work?

Have you ever considered the mark you'll leave as a leader? The deeds, decisions, and drive you bring to the table al...

The 6 Stages of Moral Development: A Comprehensive Guide

Have you ever considered the reasons behind your choices? Whether you're picking your breakfast or making big-figure ...

Effective Teamwork: The Conditions, Skills, and Components

Creating an environment where teams can be truly effective and successful requires certain conditions, components, an...

[Guide] Mapping the Path of Erikson's Developmental Process

Imagine a map that spreads from when you're born until you're gray and old. It's a map that shows the complicated pro...

How to Write an Employee Warning (With Letter Template!)

Handling employee discipline is no picnic, but it's essential to running a successful team. With tips, ideas, and a t...

How to Master the STAR Method: How Does It Work?

Do job interviews get you feeling tied up in knots? Why not give the STAR method a try? This technique cuts through t...

What Is the Johari Window Model and How Does It Work?

There's a powerful tool from psychology that helps us learn about ourselves and how others see us; they call it the J...

Working with Micromanagers: Signs, Tips, and What to Do

Micromanagement. You've likely heard of it. It's when a boss on your team goes overboard with control. They look into...

A Beginner's Guide to the "Big 5" Personality Traits

The "Big 5" personality traits spark a lot of interest. This idea comes straight from important psychological studies...

Enneagram Guide: Types, Tests, Assessments & More

The Enneagram test is like a key to understanding human personality. It shows everyone's unique strengths, weaknesses...

Guide to Employee Self-Evaluation Tips (+Free Examples)

The usefulness of self-evaluation isn't strictly tied to preparations for performance reviews. It's about nudging emp...

Merit Increases in 2024: Everything You Need to Know

Significant changes are happening in the business world because of pay increases based on excellent job performance. ...

Guide: What Are the Seven Barriers to Communication?

Clear interaction forms an essential foundation for personal and business partnerships – it isn't always easy, though...

Hiring Guide: What Is a TMS (Talent Management System)?

Good human resources management keeps a business ticking, right? A Talent Management System (TMS) is often the go-to ...

Key Concepts in Bolman and Deal's Four-Frame Model

Workplace dynamics can get tricky at times. One tool that can help is Bolman and Deal's Four-Frame Model. Have you ev...

The Key Principles of the GROW Model Coaching Process

The GROW strategy is deeply involved in personal coaching and personal growth. Just imagine you're on a journey. Each...

[Guide] What Is Vroom's Expectancy Theory of Motivation?

Victor H. Vroom gives us the well-known Expectancy Theory of Motivation. He offers a clear explanation of how people ...

10 Common Examples of Workplace Conflicts (And Solutions)

The presence of conflict in the workplace isn't necessarily a bad thing. It can be tempting to try and avoid conflict...

The GROW Model: Principles and Benefits for Personal Growth

We're going to focus on something called Porter's Five Forces. This is a useful strategy created by Michael E. Porter...

6 Strategies to Effectively Manage Complexity in the Workplace

Balancing many tasks in your work life sometimes feels like navigating a swarm of chaotic bees - intense and turbulen...

Employee Loyalty: Why It's The Key to a Thriving Business

Have you ever been on a team with no genuine interest or care? It's like being lost at sea during a storm with no pla...

Essential Elements of Lewin's Leadership Theory: A Breakdown

If you are in a leadership position, effectively guiding your team is paramount, regardless of whether you're just be...

Mastering Leadership Shadow: Easy Steps to Success

Have you ever paused to consider the impact of your leadership shadow? Like a towering skyscraper, it casts an immens...

Blinkist vs. getAbstract: Which is a Better Book Summary App?

Some of the most successful people in history and in our modern times have been avid readers– Warren Buffett is said ...

PESTEL (PEST) Analysis: How to Evaluate External Influences

Change in your organization can be driven by a wide variety of factors, some of which are internal while others are e...

15 Effective Strategies to Combat Workplace Complacency

When an employee goes into autopilot and is just going through the motions, they've become complacent. Not only does ...

The Ten Types of Discrimination: Essential Employer Guide

If an employer discriminates against an employee, it means that they are treating them differently than other employe...

Exploring Work Ethic: How to Define and Showcase It

Every company is looking to bring in team members who are loyal, responsible, dependable, and go the extra mile. When...

Addressing Employee Absconding and The Top 10 Reasons

When an employee decides to leave your organization, there is a standard procedure they are expected to follow. Many ...

8 Powerful Examples of Employee Empowerment at Work

Empowering your employees is something that is often discussed in the business world. You can achieve countless benef...

Optimism vs Pessimism: How to Balance Your Team's Attitude

As a business owner or manager, you likely often think about how you can boost team productivity in your organization...

Employee Connection Tips: How to Strategically Place Workers

Composing a successful team requires selecting individuals with the right skills and knowledge to help the team achie...

What Are The 10 Essential Soft Skills for Project Management?

Project managers are responsible for initiating, executing, and finishing projects– following projects from ideation ...

Born Leader vs. Made Leader and The Difference Between Them

Are great leaders born with the qualities they need to succeed, or are they something that can be developed through t...

15 Online Whiteboard Tools for Training Online (Free and Paid)

In the world of virtual training, online whiteboard tools have genuinely been a game changer. Team leaders are able t...

Instructional Design Guide: What Is It and How Does It Work?

If you're interested in improving efficiency and performance in your workplace, one of the most effective things you ...

[Guide] What Are The Different Employee Onboarding Phases?

For many organizations, the onboarding process focuses entirely on administrative tasks, such as completing new hire ...

What Is a Learning Management System, and Do You Need One?

The earliest learning management systems were developed in the late 1990s, but these platforms have evolved significa...

Accountability vs. Responsibility: Striking the Balance for Success

Accountability and responsibility are words often used interchangeably, but they differ in several important ways. Fo...

What is a Berke Assessment? Questions, FAQs, Alternatives & More

During the hiring process, recruitment teams are tasked with gathering as much information as possible regarding the ...

Assessing & Enhancing Listening Maturity: A Comprehensive Guide

Effective communication is an essential building block of all successful businesses, and listening is a vital compone...

Intercultural Management Guide: What Is It and Why Is It Important?

Organizations of all sizes can benefit from implementing intercultural management initiatives, yet many vastly undere...

Developing Your Team With Learning, Training, and Education

It's easy for teams to get so bogged down in the day-in, day-out of necessary tasks that they can't look forward towa...

Our Recommendations

• Best Small Business Loans for 2024
• Businessloans.com Review
• Biz2Credit Review
• SBG Funding Review
• Rapid Finance Review
• 26 Great Business Ideas for Entrepreneurs
• Startup Costs: How Much Cash Will You Need?
• How to Get a Bank Loan for Your Small Business
• Articles of Incorporation: What New Business Owners Should Know
• How to Choose the Best Legal Structure for Your Business

Small Business Resources

• Business Ideas
• Business Plans
• Startup Basics
• Startup Funding
• Franchising
• Success Stories
• Entrepreneurs
• The Best Credit Card Processors of 2024
• Clover Credit Card Processing Review
• Merchant One Review
• Stax Review
• How to Conduct a Market Analysis for Your Business
• Local Marketing Strategies for Success
• Tips for Hiring a Marketing Company
• Benefits of CRM Systems
• 10 Employee Recruitment Strategies for Success
• Sales & Marketing
• Social Media
• Best Business Phone Systems of 2024
• The Best PEOs of 2024
• RingCentral Review
• Nextiva Review
• Ooma Review
• Guide to Developing a Training Program for New Employees
• How Does 401(k) Matching Work for Employers?
• Why You Need to Create a Fantastic Workplace Culture
• 16 Cool Job Perks That Keep Employees Happy
• 7 Project Management Styles
• Women in Business
• Personal Growth
• Best Accounting Software and Invoice Generators of 2024
• Best Payroll Services for 2024
• Best POS Systems for 2024
• Best CRM Software of 2024
• Best Call Centers and Answering Services for Busineses for 2024
• Salesforce vs. HubSpot: Which CRM Is Right for Your Business?
• Rippling vs Gusto: An In-Depth Comparison
• RingCentral vs. Ooma Comparison
• Choosing a Business Phone System: A Buyer’s Guide
• Equipment Leasing: A Guide for Business Owners
• HR Solutions
• Financial Solutions
• Marketing Solutions
• Security Solutions
• Retail Solutions
• SMB Solutions

How Porter’s Five Forces Can Help Small Businesses Analyze the Competition

Table of Contents

Knowing who your competitors are and how their products, services and marketing strategies affect you is critical to your business’s survival. Whether you’re a Fortune 500 company or a small, local business, competition has a direct influence on your success.

One way to analyze your competition and determine your industry standing is to use Porter’s Five Forces model. Originally developed by Harvard Business School’s Michael E. Porter in 1979, the Five Forces model looks at five factors that determine whether a business can be profitable in relation to other businesses in the industry. 

Using Porter’s Five Forces and other analytics models will help you understand where your company fits in the industry landscape.

Understanding Porter’s Five Forces model

Porter’s Five Forces model is a competitive analysis method that’s considered a macro tool in business analytics. It looks at the industry’s economy as a whole; in contrast, a SWOT analysis is a microanalytical tool that focuses on a specific company’s data and analysis.

“Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time,” Porter wrote in a 2008 Harvard Business Review article . “A healthy industry structure should be as much a competitive concern to strategists as their company’s own position.” 

Porter theorized that understanding the competitive forces at play and the overall industry structure is crucial for effective, strategic decision-making and the development of a compelling competitive strategy for the future.

Here are the five forces in Porter’s model:

1. Competitive rivalry

This force examines marketplace competition intensity. It considers the number of existing competitors and what each one can do. Rivalry competition is high when these conditions are met:

• Only a few businesses sell a product or service.
• The industry is growing.
• Consumers can easily switch to a competitor’s offering for little cost. 

When rivalry competition is high, advertising and price wars ensue, which can hurt a business’s bottom line.

2. The bargaining power of suppliers

This force analyzes a supplier’s power and control over price increases. When a B2B vendor has extensive control over pricing, their client business’s profit margins can suffer. 

This force also assesses the available number of suppliers of raw materials and other resources. The fewer suppliers in the supply chain there are, the more power they have. Businesses are in a better position when there are many suppliers. 

3. The bargaining power of customers

This force examines consumer power and its effect on pricing and quality. Consumers have power when there are fewer sellers because they can easily switch to another seller. Conversely, buying power is low when consumers depend heavily on a single seller. When a business has more customers, the buying power of each individual customer is low.

4. The threat of new entrants

This force considers how easy or difficult it is for competitors to join the marketplace. The easier it is for a new competitor to gain entry, the greater the risk that an established business’s market share will be depleted. Barriers to entry include absolute cost advantages, access to inputs, economies of scale, and strong brand identity .

5. The 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 a competitor’s offering. It examines the number of competitors, how their prices and quality compare with the business being examined, and how much of a profit those competitors are earning — which, in turn, would determine if they can lower their costs even more. The threat of substitutes is informed by switching costs, both immediately and in the long term, as well as consumers’ inclination to change. 

To fully understand the threat of substitute products or services, you must ensure you can correctly calculate the cost of goods sold .

Example of Porter’s Five Forces

There are many examples of how Porter’s Five Forces can be applied to various industries. 

The ultimate goal is to identify the opportunities and threats that could affect a business. 

In this example, the financial education company 365 Financial Analyst looked at the competitive position of retail giant Walmart. Here’s how it breaks down:

• Competitive rivalry: Walmart has a significant reach, a strong brand identity, a physical and online presence, and low prices that make it difficult for small challengers in the retail space to compete. However, Walmart does face sustained challenges from large, established competitors such as Target, Costco and Amazon. Overall, Walmart faces a moderately competitive rivalry space.
• Bargaining power of suppliers: A diverse supplier base limits supplier bargaining power. Additionally, due to Walmart’s size, purchasing power and consumer reach, each individual supplier exerts very little influence on the company.
• Bargaining power of customers: Walmart has a massive customer base of small buyers, weakening the power of any single customer and granting the company significant leverage. The company’s low prices, established locations and online presence further reduce the power of any single customer. However, customers can switch to other retailers at little or no cost, affording them some power. Overall, buyer bargaining power is medium to low.
• Threat of new entrants: Walmart maintains a substantial edge in sales, marketing, distribution and established business locations. It also has a highly developed and deployed online presence to complement its physical locations. Due to its size and established network, Walmart also has the advantage of selling to multiple customers while being able to purchase at scale from various suppliers. All of these factors, as well as the established nature of large rivals such as Amazon, make the threat of new entrants low.
• Threat of substitute products: Walmart’s economies of scale, reach and size ensure it carries almost all brands and products a customer would like, with the exception of specific in-house brands that its rivals offer. Even then, Walmart can leverage economies of scale to offer products and a range of substitutes at low costs. As such, the threat of substitute products is low.

Walmart’s economic impact on the communities where it opens stores can be both positive and negative. It can serve as an anchor store that drives additional business, but it can also lower wages locally.

Strategies for success

Once your analysis is complete, it’s time to implement a strategy to expand your competitive advantage. To that end, Porter identified three generic strategies that can be implemented in any industry and by companies of any size.

Cost leadership

Your goal is to increase profits by reducing costs while charging industry-standard prices, or to increase market share by reducing the sales price while retaining profits.

Differentiation

To implement this strategy, your company’s products must be significantly better than the competition’s, thereby improving their competitiveness and value to the public. It requires thorough research and development, plus effective sales and marketing.

Successful implementation entails the company selecting niche markets in which to sell its goods. It requires an intense understanding of the marketplace, as well as deep knowledge of the business’s sellers, buyers and competitors. (Consult Porter’s 1985 book Competitive Advantage for more information.)

While Porter’s Five Forces model is helpful, it’s inherently backward-looking. Consider conducting modeling exercises regularly while accounting for business trends and marketplace shifts to keep models up to date.

Alternatives to Porter’s Five Forces

While Porter’s Five Forces is an effective and time-tested model, it has been criticized for failing to explain strategic alliances. In the 1990s, professors Adam Brandenburger, then at Harvard Business School and now at New York University’s Stern School of Business, and Barry Nalebuff, of the Yale School of Management, created the idea of a sixth force, “complementors,” using game theory insights. (Consult their book, Co-Opetition , for more information.)

In this model, complementors sell products and services that are best used in conjunction with a competitor’s product or service. For example, Intel, which manufactures processors, and Lenovo, a computer manufacturer, could be considered complementors.

These additional modeling tools can inform your understanding of your business and its potential:

• Value chain analysis: A value chain analysis helps companies understand where their best productive advantage lies.
• BCG matrix: The BCG matrix helps companies identify which products will likely benefit most from increased investment.
• PEST analysis: Businesses should also consider conducting either a PEST analysis or a PESTLE analysis. These analyses take into account how external political, economic, sociocultural and technological forces — as well as legal and environmental forces, in a PESTLE analysis — can affect the business environment. This analysis should be conducted alongside Porter’s Five Forces to provide a thorough overview of factors and challenges that influence a business and its industry. 

Navigating the economic environment

All business decisions contain elements of risk and uncertainty. Conducting routine analyses of the business, industry and overall economic environment is vital to the success of any company, regardless of its size. Porter’s Five Forces model provides a clear framework that business leaders can employ to understand how their business fits into the larger industry. 

Using Porter’s Five Forces alongside additional analytical tools and models — like a SWOT analysis, a BCG matrix and a PEST(LE) analysis — can help business leaders navigate the broader economic environment with greater confidence and, ultimately, reap increased odds of success. 

Jeremy Bender and Katherine Arline contributed to this article. 

Building Better Businesses

Insights on business strategy and culture, right to your inbox. Part of the business.com network.

• Online Degree Explore Bachelor’s & Master’s degrees
• MasterTrack™ Earn credit towards a Master’s degree
• University Certificates Advance your career with graduate-level learning
• Top Courses
• Join for Free

Using Porter’s Five Forces Model for Competitive Analysis

Taught in English

Instructor: Omodiaogbe Samuel

Guided Project

Recommended experience.

Intermediate level

Familiarity with basic business and business terms

What you'll learn

Conduct analysis of the industry you want to play in to determine whether it’s attractive enough for you to enter

Identify the external factors that determine the profitability level of your potential industry

Shape your competitiveness by devising strategies to influence your external environment to your advantage

Skills you'll practice

• Strategic Management
• Strategic Planning
• Entrepreneurship

Details to know

Add to your LinkedIn profile

See how employees at top companies are mastering in-demand skills

Learn, practice, and apply job-ready skills in less than 2 hours

• Receive training from industry experts
• Gain hands-on experience solving real-world job tasks
• Build confidence using the latest tools and technologies

About this Guided Project

By the end of this guided project, you will be able to use the Porter’s Five Force model to determine the attractiveness and profitability potentials of your industry. The Five Forces is a model that was drawn from industrial organization economics to identify and describe the fundamental economic forces that shape every industry. The five forces are competition in the industry, potential of new entrants, power of suppliers, power of customers, and threat of substitute products. These forces determine the intensity of competition and hence the attractiveness and profitability of an industry. Essentially, awareness of the five forces can help you to understand the structure of your industry, and therefore stake a position is that less vulnerable

For us to practically demonstrate how to use the framework to conduct analysis of an industry and make strategic decisions, we will analyze an energy services company as a case study. Example of the case study would empower you with the skillset to apply the model to your company or any other company of your choice. Porter’s Five Forces model can be used to determine the viability of a new business, or to evaluate growth potential for an existing business. The project is for strategist, business leader, and entrepreneurs that want to determine the competitiveness of their companies

Learn step-by-step

In a video that plays in a split-screen with your work area, your instructor will walk you through these steps:

Task 1: Introduction: By the end of this task, you will explain the Porter Five Forces Model

Task 2: New Entrant: By the end of this task, you will express the threat of new entrant into your industry

Task 3: Power of Suppliers: By the end of this task, you will determine the bargaining power of suppliers

OPTIONAL Assessment

Task 4: Power of Buyers: By the end of this task, you will identify the bargaining power of buyers

Task 5: Threat of Substitute: By the end of this task, you will highlight the threat of substitute products

Task 6 Competitive Rivalry: By the end of this task, you will express the competitive rivalry in your industry

Task 7: Strategic Approach: By the end of this task, you will set your strategic direction

OPTIONAL Portfolio Activity

10 project images

The Coursera Project Network is a select group of instructors who have demonstrated expertise in specific tools or skills through their industry experience or academic backgrounds in the topics of their projects. If you're interested in becoming a project instructor and creating Guided Projects to help millions of learners around the world, please apply today at teach.coursera.org.

How you'll learn

Skill-based, hands-on learning

Practice new skills by completing job-related tasks.

Expert guidance

Follow along with pre-recorded videos from experts using a unique side-by-side interface.

No downloads or installation required

Access the tools and resources you need in a pre-configured cloud workspace.

Available only on desktop

This Guided Project is designed for laptops or desktop computers with a reliable Internet connection, not mobile devices.

Why people choose Coursera for their career

New to Business Strategy? Start here.

Open new doors with Coursera Plus

Unlimited access to 7,000+ world-class courses, hands-on projects, and job-ready certificate programs - all included in your subscription

Advance your career with an online degree

Earn a degree from world-class universities - 100% online

Join over 3,400 global companies that choose Coursera for Business

Upskill your employees to excel in the digital economy

Frequently asked questions

What will i get if i purchase a guided project.

By purchasing a Guided Project, you'll get everything you need to complete the Guided Project including access to a cloud desktop workspace through your web browser that contains the files and software you need to get started, plus step-by-step video instruction from a subject matter expert.

Are Guided Projects available on desktop and mobile?

Because your workspace contains a cloud desktop that is sized for a laptop or desktop computer, Guided Projects are not available on your mobile device.

Who are the instructors for Guided Projects?

Guided Project instructors are subject matter experts who have experience in the skill, tool or domain of their project and are passionate about sharing their knowledge to impact millions of learners around the world.

Can I download the work from my Guided Project after I complete it?

You can download and keep any of your created files from the Guided Project. To do so, you can use the “File Browser” feature while you are accessing your cloud desktop.

What is the refund policy?

Guided Projects are not eligible for refunds. See our full refund policy Opens in a new tab .

Is financial aid available?

Financial aid is not available for Guided Projects.

Can I audit a Guided Project and watch the video portion for free?

Auditing is not available for Guided Projects.

How much experience do I need to do this Guided Project?

At the top of the page, you can press on the experience level for this Guided Project to view any knowledge prerequisites. For every level of Guided Project, your instructor will walk you through step-by-step.

Can I complete this Guided Project right through my web browser, instead of installing special software?

Yes, everything you need to complete your Guided Project will be available in a cloud desktop that is available in your browser.

What is the learning experience like with Guided Projects?

You'll learn by doing through completing tasks in a split-screen environment directly in your browser. On the left side of the screen, you'll complete the task in your workspace. On the right side of the screen, you'll watch an instructor walk you through the project, step-by-step.

More questions

Porter’s Five Forces Analysis Example – Walmart

Join over 2 million professionals who advanced their finance careers with 365. Learn from instructors who have worked at Morgan Stanley, HSBC, PwC, and Coca-Cola and master accounting, financial analysis, investment banking, financial modeling, and more.

Porter’s Five Forces framework evaluates the competitive landscape of an industry and reveals valuable insights into the key dynamics within a market. The results of the analysis allow for making well-informed strategic decisions with confidence. In this article, we’ll explore a real-life Porter’s Five Forces analysis example, assessing the competitive position of the retail giant Walmart.

We’ll break down the entire process into the following four stages:

Stage 1 : Define the area of interest

Stage 2 : Collect data

Stage 3 : Analyze the data

Stage 4 : Draw conclusions and recommendations

Stage 1: Define the Area of Interest

Suppose you’re a strategy manager at Walmart. Today’s business environment dynamics are constantly changing, especially in the retail industry. Competing against big players like Amazon, Costco Wholesale, and Target requires regular industry analysis. To assess Walmart’s competitive position, you decide to conduct Porter’s Five Forces analysis .

Many business professionals analyze a whole industry rather than an individual organization. Threats and opportunities within an industry will typically coincide with those of a particular company. But not always—at the end of the day, it all comes down to the specific business insights you need.

Stage 2: Collect Data

This stage is all about data collection. You look for valuable information about the retail industry, focusing on Walmart’s competitors, buyers, suppliers, newcomers, and substitutes. You can use this data to evaluate the factors that make up the five forces. You should also look up Walmart’s Annual Reports.

Below, you can find a handy table that outlines the most prominent factors to consider when collecting industry-specific information for each force.

These pointers will help you organize your findings better, serving as a valuable guide for our Porter’s Five Forces analysis example. The list isn’t exhaustive, so if there’s anything you think will make a big difference for a company’s competitive position, write it down—even if it’s not in this table.

Stage 3: Analyze the Data

The following is the information you gather after carefully examining Walmart’s Annual Reports and other relevant business data in our Porter’s Five Forces analysis example.

Threat of New Entrants (Very Low)

Walmart is a giant in the retail industry. It invests a lot in sales, marketing, distribution, and product development. If another party wants to join the industry, they should put down considerable initial capital to compete against existing players. After all, all retailers strive for the same number of buyers while offering somewhat similar products. Overall, severe retaliation makes it difficult to survive in the retail business.

On top of that, Walmart sustains a great relationship with suppliers and sells to many customers. So, economies of scale indeed work in its favor. Because of its well-designed distribution systems and range, we observe low sunk costs, too.

Knowing all this, the risk of new joiners seems mitigated. As a result, the threat of new entrants is ranked very low.

Bargaining Power of Buyers (Medium-to-Low)

Walmart deals with many small buyers daily, which disseminates the purchasing power of those buyers. Contrary to popular belief, those customers exert moderate-to-low control over the retail giant. That’s because the store’s low-price approach and convenience are difficult to find anywhere else. As a result, the company doesn’t feel much pressure from customers regarding pricing.

At the same time, the constant need for specific new brands currently not in stock weakens Walmart’s power as a buyer and strengthens the customers’ potency. Besides, switching costs are low—anyone can shop at a different store. But buyers are highly sensitive to price changes and find Walmart the best choice to satisfy their needs. As for substitutes, Walmart is too big to worry about that—its product variety, low prices, and locations can’t be beaten.

That’s why the bargaining power of buyers is evaluated as medium-to-low.

Bargaining Power of Suppliers (Very Low)

The store chain purchases products from different suppliers. Walmart—one of the leading players in supplying products and services—is a buyer for those producers. With its large purchasing volumes and broad customer reach, Walmart is a buyer of high power. That’s why its suppliers ensure they cater to its needs as best as possible. They even build operational centers adjacent to the store locations to meet Walmart’s demands. And if a supplier can’t accommodate its requests, Walmart is confident enough to switch to a different one.

Only a handful of companies—such as Coca-Cola—can surpass Walmart in strength and independently cater to end customers, but those are rare exceptions. Besides, Walmart has long employed a Supplier Diversity Program as part of its Corporate Social Responsibility outlook, further mitigating its dependency on a single distributor.

In short, Walmart is a strong buyer whose suppliers exert meager power .

Threat of Substitutes (Low)

Walmart offers various products and item categories—from groceries to household appliances. It’s unlikely that a product isn’t available at Walmart but is accessible elsewhere. With its broad range, the retailer fights no strong substitution. A product and all its substitutes will probably be on the shelves of Walmart. The retail giant should only worry about industry rivals like Target, which may attract individuals by offering comparable product diversity. But this has to do with industry rivalry and not product substitution.

Since almost all product variations are easily found on the store shelves of Walmart, there’s no real threat of substitutes to consider.

Industry Rivalry (Medium)

With nearly 4% industry growth and over $6.5 trillion market size in 2021 , the US retail industry maintains high competition. Regarding Walmart, however, the department store chain meets no significant challenges from small contenders. The competitive advantage economies of scale and price strategy bring to Walmart can hardly be found elsewhere. There are, however, a few rivals the company must keep a vigilant eye on, including Costco, Target, Kroger, and Amazon. Still, their distribution channels and pricing strategies are yet to outperform Walmart’s.

In a nutshell, the retail giant scores medium industry rivalry in the US retail business.

Stage 4: Draw conclusions and recommendations

Porter’s Five Forces analysis aims to identify which areas companies should focus on when making strategic decisions. For Walmart, this is industry rivalry because it’s the only one that exerts medium power to its competitive position. That’s why the retailer must continuously strengthen its capacity in relation to existing players. To do that, the company should further invest in the following:

• Automation of internal processes for supply chain management
• Human resource development

With improved supply chain operations, Walmart can live up to its mission and vision to be cost-effective. As for human resource development, skilled employees and executives will inevitably bring fresh strategic ideas on overcoming industry threats while benefiting from emerging business opportunities.

The bottom line is that these strategic approaches may contribute to better efficiency and business growth. As a result, Walmart can remain persistent in beating the competition.

Porter’s Five Forces Analysis Example: Key Takeaway

Fundamentally, Walmart should leverage its economies of scale and pricing strategies to reduce industry rivalry and mitigate the risk of new entrants and substitutes. While suppliers and buyers hold limited bargaining power, the retailer should continue to allocate resources to meet their needs. Implementing strategies related to human resources and automation could be viable options for the company’s long-term success.

Do you wonder what tools companies employ to survive competition in today’s world?

Porter’s Five Forces model is central to competitive analysis, but analysts often employ other approaches in conjunction. Our Introduction to Industry and Company Analysis course contains fundamental models companies of all sizes use to sustain their position in the market. Discover insights about industry concentration and capacity, pricing power, industry lifecycle stages, and economic determinants.

Enroll in our platform today and join a community of experts committed to success.

Share this article:

Nicolette Son

Nicolette brings her expertise in linguistics to the 365 Financial Analyst team, where she crafts content that makes complex financial concepts accessible. Her background in English Philology and a Bachelor of Business Administration guides her approach to simplifying the intricacies of finance. She’s committed to giving professionals the key financial skills needed for high-level corporate roles.

We Think You Will Also Like

Defining a company’s vision, mission, goals and values statements.

The Role of Strategy. What Makes a Strategy Successful?

Porter’s 5 forces model: bargaining power of buyers.

How to Model a Competitive Strategy with Porter’s 5 Forces [Template + Examples]

A quick rundown, examples, and case study using Porter's 5 Forces.

A methodology for amazing meetings. Say goodbye to boring, long, and unproductive meetings.

For an organization to plan and execute its competitive strategy, it needs to understand its market and competitors.  

Simple enough, but how do you “understand” your market and competitors? Porter’s 5 Forces Framework provides a methodology for doing so. 

And while Michael Porter published his methodology in 1979, the principles it was built on are as relevant as ever today.  

In this post, I’ll define the model, explain its use, and illustrate (with examples) what Porter’s Five Forces look like in practice. 

Porter’s 5 Forces Defined

Porter’s Five Forces Framework is a method for analyzing an industry to understand a business’s competitive position within that industry. 

This framework is comprised of the following five forces:

• Threat of new entrants
• Threat of substitutes
• Bargaining power of customers
• Bargaining power of suppliers
• Competitive rivalry

The threats of new entrants or substitutes are horizontal competitive forces, meaning they come from outside the industry to increase competition for customers. 

For example, the airline industry cedes customers to the competitive force of substitutes like cars, trains, and cruise ships. Similarly, new entrants to the airline industry reduce profitability by increasing competition for customers.

The bargaining power of customers and suppliers are vertical competitive forces, meaning they impact the value chain that flows from supplier to consumer. 

Suppliers will always want to charge more and supply less and consumers will always want to pay less and get more. Understanding the bargaining power of suppliers and consumers, then, helps strategists find opportunities and threats.

The final force is competitive rivalry , which refers to competitive forces within the industry. 

The following image illustrates each of Porter’s 5 Forces:

Porter’s 5 Forces: Usage in Strategic Management

Porter’s model is a tool. Like any tool, it works best when it’s applied correctly.

To that end, the framework is meant to be used to analyze an industry, not an entire sector. Nor is it meant for analyzing smaller submarkets.

For example, imagine you lead strategy for Southwest Airlines. 

In this case, you’d use Porter’s 5 Forces to analyze the airline industry, not the entire transportation sector, nor the private jet charter submarket. The transportation sector is too broad and the jet charter market too narrow for Porter’s model to generate useful insights.

According to Lumen Learning , at a high-level, Porter’s framework is used to:

• Narrow the strategy builder’s focus on specific critical issues within a given industry.
• Demonstrate the perceived opportunities within an industry landscape.
• Make a qualitative analysis of a given company’s strategic position.
• Evaluate decisions in the context of the organization’s environment.

Of course, Porter’s 5 Forces is not infallible. At the very least, though, it’s a useful first step for managers building or adapting a strategy. For example, this model could provide the underlying analysis strategists need to set useful objectives and key results.

{{vital="/blog-inserts"}}

Examples of Porter’s 5 Forces Use in a Case Study

To illustrate how you can apply this model, this section will paraphrase the Panmore Institute’s case study of Apple using a Five Forces analysis. This analysis focuses on Apple’s position within the smartphone industry.

Note that, while some analysts use a scale of one to five for each force, this analysis will categorize forces as strong, moderate, or weak.

Competitive Rivalry: Strong Force

Apple faces stiff competition because of the high aggression of rival firms, low differentiation between products, and the low cost of switching.

In other words, firms like LG and Samsung market their products aggressively. And their phones can do many of the same things Apple’s can. It’s also relatively easy for customers to switch from Apple to another brand, which makes competitive rivalry a stronger force.

Bargaining Power of Customers: Strong Force

The bargaining power of Apple’s customers is a strong force because of the low cost of switching and customers’ access to information. 

The one thing that works in Apple’s favor as it relates to this force is the fact that customers are individuals. If customers had collective bargaining power, this force would be even stronger.

Bargaining Power of Suppliers: Weak Force

Apple has access to many different suppliers and the overall supply of Apple’s inputs is also quite large. Add to that the fact that there are many suppliers and relatively few smartphone sellers, and suppliers’ bargaining power is a weak force. 

Threat of Substitutes: Weak Force

In Apple’s case, the threat of substitutes is low because, although there are some substitutes, they typically have inferior performance. For example, consumers could buy a camera to take pictures, but they’d lose the convenience of having the smartphone’s other features.

Threat of New Entrants: Moderate Force

The capital requirements needed to build a brand that competes with Apple helps weaken this force. However, other large firms like Google have shown they can enter the smartphone industry. In other words, many large companies could become new entrants, making this a moderate force.

Porter’s Five Forces Summarized Analysis

This case study of Apple using Porter’s model focuses the analyst's attention on specific threats for Apple. In this case, the strongest forces—and by extension the most important ones—are competitive rivalry, the bargaining power of customers, and the threat of new entrants.

In this way, Porter’s Five Forces Framework indicates where managers need to prioritize their efforts. 

For example, due to the weak force of substitutes, it wouldn’t make sense to spend marketing resources on positioning Apple’s products as superior to its substitutes. But it would likely be worthwhile to explore ways in which Apple could erode the bargaining power of its customers. 

Grab a Porter’s 5 Forces Template

If you want to put Porter’s 5 Forces Framework to use, it’ll help to have a template.

Creately provides several templates which you can play with for free. Or you can use these templates from PresentationGO in Google Slides or PowerPoint. 

A final option comes from TopExcelTemplates which offers templates organized in an Excel spreadsheet.

{{go-further-with-hugo="/blog-inserts"}}

Don't let unproductive meetings slow you down

See the impact of fewer, shorter meetings, increased accountability, and enhanced productivity with Fellow.

You might also like

OKR Definition (What are OKRs, exactly?)

OKRs stands for "Objectives and Key Results." But what does that really mean?

Team Leaders: 10 Tips on How to Host Effective Meetings

To run a great meeting, keep the team aligned, and the agenda short, specific, and action-oriented.

The 4-Hour Meeting Week 📅 (How to spend way less time in meetings)

My first day at work was a breeze until my boss Josh told me about our 10% rule.

Got something to contribute?

Want to create or adapt books like this? Learn more about how Pressbooks supports open publishing practices.

6 Porter’s Five Forces

Amna A., Maham H., Viola H., Rashmi K.

An Open Educational Resource

Porter’s Five Forces is a framework used to analyze the balance of power within a particular industry and therefore, its overall profitability. These outline 5 forces that drive competition and threaten the company’s ability to make profits.

Created by Michael E. Porter of Harvard Business School in the 1970s, Porter’s Five Forces sets out to answer questions such as: What’s going on out there in your industry? What deserves your attention? Of the many things that are happening, which ones matter for competition? It is able to determine how different parts of an industry interact in order to allow for profitability without changing the level of quality of the product or services provided by industry. It is also able to determine how changes within an industry can affect a given sector. Porter’s 5 forces are therefore used to predict industry trends and changes in competition, and this information can help a company to make strategic decisions about the industry to gain/maintain status within it.

The Five Forces consist of Industry Rivalry, threats of potential entrants, threats of substitutes, strength of buyer power and strength of supplier power. As you can see in Figure 1, four of the forces feed into Industry rivalry.

Buyer’s Power

Buyers have the ability to influence the decision-making process of a company. Buyers with a lot of power can force prices down or demand that the company put more value into a service or product. Buyers are able to gain all the value for themselves, consequently decreasing profitability for the industry. If a company has many smaller buyers, the company is able to lose one such customer without any detrimental effects on the business. However, if the company has few larger buyers, this is not the case. Buyers have power if the following occur:

• A large volume of product is purchased by fewer buyers.
• Buyers are able to switch companies without incurring costs to themselves. This is due to the undifferentiated and standard nature of the products or services.
• Buyers have complete information on how the industry is working, including demand, actual market prices, and even supplier costs. This information can place buyers in a better negotiating position.

Supplier’s Power

Similar to buyers, suppliers can also influence industry decision making. Suppliers are able to dictate terms of business such as price, quality, delivery times, etc. A company should not be dependent on one large supplier but have many smaller suppliers in order to decrease supplier power. Suppliers retain their power due to the following:

• Suppliers are concentrated or have a monopoly on supplies.
• There are no real substitutes available to compete against.

Potential Entrants

These are individuals looking to enter the industry and create start-ups to compete with the existing companies and gain market share. Barriers to entry are the most critical variables which determine the position of an existing company in the industry. If the factors to start the business-like capital expenditure, technical know-how, regulations, cost advantages, customer’s brand loyalty etc. are high, the barriers for new entrants will be higher. The absence of these will allow for easier access for new entrants.

Substitutes

These are alternatives to the existing products or services available that customers can easily switch to. These substitutes have the most power when providing products/services with the same function but at higher quality and lower cost. This concept can restrict industry profitability due to the improvement of price-performance tradeoff, therefore producing higher profits for others.

Industry Rivalry

Firms with the same industry have the tendency to compete in an attempt to dominate the market. Rivalry is dependent on the number of firms within the same market and the extent to which they collude with each other. Rivalry occurs because there is opportunity or pressure for improvement. Firms compete using a variety of strategies, including price competition, advertising battles, product introductions, customer services changes and extended warranties. Rivalry is able to keep prices down, improve quality and therefore benefits industry customers.

Porter’s Five Forces: Netflix

Netflix is a US-based internet streaming media provider founded by Reed Hastings and Marc Randolph in 1997. It originally started with providing DVD-by-mail service in North America and now provides digital streaming with services available worldwide. Although Netflix is the most popular online subscription service for streaming entertainment in the world, there are some issues which threaten the long-term viability of their business model. Below is an assessment of Netflix using Porter’s Five Forces model to determine how market forces may affect the company’s business.

Power of Buyers

The bargaining power of buyers is high because:

• Customer loyalty is weak. Since customers have zero switching cost, they can cancel the subscription anytime and switch to a new or alternate service provider.
• Customers are highly price-sensitive. They tend to switch to a new or alternate service whenever the cost is increased. For instance, in 2011, Netflix divided their DVD-by-mail service and streaming service into two separate services, which was earlier priced $10 per month for both together. They increased the cost to $7.99 per month for each and in less than 3 months’ time, they lost around 800,000 customers. In 2014, they increased the cost from $7.99 to $8.99 per month and gave 2 years exemption from price increase to the existing subscribers to mitigate this risk.
• Customer subscription fees are the major stream of revenue since commercials are not included.
• There is a considerable threat posed by piracy sites which provide free streaming services and customers may compromise quality for this benefit.
• Mitigation of these concerns can considerably reduce the bargaining power of buyers. Offering original content (for example, original TV series like House of Cards, Orange is the New Black, and Arrested Development) which is available only through Netflix is one of the ways by which they are mitigating this risk.

Power of Suppliers

The bargaining power of suppliers is high because:

• Suppliers are contracted with Netflix through Licensing Agreements. Once the agreement expires, a supplier may switch to a new/alternate service provider and this will have a significant impact on the business as it reduces the volume of content available for Netflix customers. For instance, in 2013, after the contract with Netflix expired, Viacom contracted with Amazon and Netflix lost access to air their programs.
• Suppliers are also offering their own digital streaming services. Hulu, a joint venture of 21st Century Fox, NBCUniversal, and The Walt Disney Company, offers high volumes of own content, as well as shows from various other networks. A part of their subscription service supports commercials and hence mitigates the consumer price-sensitivity risk by creating an additional revenue stream that makes them less reliant on subscription volume to remain profitable.
• Suppliers own a majority of the content and Netflix is highly dependent on them for large volumes of content with high quality, which is a threat to the long-term viability of their business model.
• Mitigation of these concerns can considerably reduce the bargaining power of suppliers. As a mitigation strategy, Netflix pursued backward integration by making original content, thereby reducing their dependency on suppliers.

The threat of new entrants is moderate because:

• Netflix works on a high economy of scale with high product variety, maintaining low cost and increasing profit. New entrants with low investment capital are less likely to enter this market, but bigger companies like Google and Apple with strong financial and technical capabilities can be a huge threat to Netflix.
• Competition in online streaming is likely to intensify in the future since the movie and television industry is a well-recognized growth sector.
• Traditional service providers are entering the market. For instance, Crave TV owned by Bell, one of Canada’s leading telecommunication companies, has entered the Canadian market. They provide online streaming service at a much lower cost than Netflix but the service is available only for Bell customers, while Netflix is available for anyone with access to the internet. Likewise, HBO and CBS are new entrants in the US market with a competitive advantage of owning large volumes of content and brand name.

The threat of substitutes is moderate because:

• Certain customer segments still tend to rely on substitutes like Satellite and Cable TV, DVDs and Rentals, and Movie Theatres for entertainment. Customers will continue to rely on television to watch live shows which get broadcasted on specific channels and on theatres to watch newly released movies.
• While there is an increasing trend in the popularity and demand for digital streaming services, rapid technological advancements may result in new and innovative substitutes that could pose a threat in the future.

Industry Rivals

Competitive rivalry is moderate because:

• Although the competitive environment is high with industry rivals like Amazon, Hulu, YouTube, HBO, and several other networks, a collaborative environment is emerging among the competitors. For instance, products like Amazon Fire TV Stick and Google Chromecast give consumers access to Netflix and other 3rd party services.
• Consumers are subscribing to two or more services at a time and hence multiple organizations will get the market share.

Mayhem is a role-playing activity that will allow students to take part in the framework of Porter’s Five Forces for a given company (See Case Summary below). The objectives of the activity are:

• To analyze Porter’s Five Forces for a given company by taking on a role in the industry, and to understand the supply chain’s effect on industry profitability.
• To assess how an industry changes in response to environmental shifts, and how this affects a given company aiming to grow within the industry.
• The students will be divided into five teams of 2-4 people, each representing an industry player outlined in Porter’s Five Forces. The presenters will take on the role of the Focal Firm, and the professor will take on the role of “Mayhem”. Descriptions of teams are outlined below, as well as relevant information regarding their position in the industry.
• Each group will be provided with important industry information pertaining to the other teams, for reference throughout the activity.
• For example, the Wannabes will decide whether the threat of new entrants against the focal firm is ↑ (high) or ↓ (low) prior to any environmental shift; the Customers group will decide whether their bargaining power is ↑ (high) or ↓ (low).
• Industry outlook will be scored by counting the number of ↓ (low) threat/power standings. A total score of 1/5 or 2/5 on the Industry Outlook chart indicates an industry that will not favour the growth of the focal firm. A score of 3/5 indicates a neutral industry, with a “wait and see” approach to be applied by the focal firm. A score of 4/5 or 5/5 indicates an industry that is favourable for growth or entry by the focal firm. See Table 2.
• Note: If a group is unaffected by the environmental shift, they will retain the threat/power standing from the neutral round.
• Several rounds of Mayhem will be played, depending on the time available.

Case Summary: Olive and Sinclair Chocolate Company

Olive and Sinclair Chocolate Company is one of the 60 chocolatiers serving the gourmet chocolate niche market. The gourmet chocolate niche market is occupied by artisanal chocolatiers that aim to produce chocolate using fair trade cocoa instead of using cocoa cartels. The main goal of artisanal chocolatiers is to make handmade chocolate with new and unique flavours instead of mass production. As a result, artisanal chocolatiers charge top dollar for their chocolate, averaging at $6.00/2.75 lb. Olive and Sinclair charge $7.00/2.75 lb. As a company, they produce more than 60, 000 pounds of chocolate per year and are planning to expand internationally.

The gourmet chocolate niche is only 10 years old in the US, and it continues to flourish with the addition of new and unique flavours. Therefore, the competition in the industry is high, many opportunities are available for new entrants and the customers have high expectations towards fine tastes. Olive and Sinclair have built their brand around old-fashioned, Southern approach to chocolate making, which adds to their competitiveness.

Environmental Shifts

• There was a crop blight (disease) which impacted the cocoa market globally by causing a decrease in cocoa supply by 40%.
• Nestlé, one of U.S.A’s major chocolate confectionaries, went bankrupt and folded.
• A recently published study showed a link between autism and chocolate and has been gaining media attention. The study claimed that chocolate causes autism in children that also take allergy medication.
• OPTIONAL ROUND: Hershey’s, one of U.S. A’s largest chocolate confectionaries, went bankrupt and folded. Hershey’s had previously acquired Scharffen Berger, one of Olive and Sinclair’s main competitors.

Note: More details about the case and the activity can be found in the Wilson (2015) paper, as listed in the References.

Table 1: Key Artisan Chocolate Industry Partners for Olive and Sinclair Case Study

Table 2: Industry Outlook Table for “Mayhem” Activity*

*Note: Answers will be filled out in class.

• Law, J. (Ed.). (2009). Porter’s Five Forces. A Dictionary of Business and Management. Oxford University Press. Retrieved from http://www.oxfordreference.com/view/10.1093/acref/9780199234899.001.0001/acref-9780199234899-e-7237
• Michaux, S. (2015). Porter’s Five Forces: Understand competitive forces and stay ahead of the competition. 50Minutes.com – Management & Marketing.
• Owen, A. S. (2003). Accounting for Business Studies. Amsterdam: Routledge.
• Magretta, J. (2012). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Boston, MA: Harvard Business Review Press.
• Porter, M. E. (2008). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, NY: Free Press.
• Richard Bowen, Robert Daigle, Tara Dion, Sarah Valentine (2014) Netflix Case Study | Retrieved from http://robertdaigle.com/wp-content/uploads/2014/01/BowenDaigleDionValentine_NetflixCaseStudy.pdf
• Shannon Szabo-Pickering (2016) A Porter’s Five Forces Analysis of Netflix | Retrieved from https://www.slideshare.net/ShannonPickering1/netflix-five-forces-analysis
• Netflix Logo | Retrieved from http://www.stickpng.com/img/icons-logos-emojis/tech-companies/netflix-logo
• Wilson, R. C. (2015). Mayhem: A Hands-on Case Playing Activity for Teaching Porter’s Five Forces to Undergraduate Business Students. Small Business Institute Journal; Greenville , 11 (2), 48–59.

Cases and Tools in Biotechnology Management Copyright © by Amna A., Maham H., Viola H., Rashmi K.. All Rights Reserved.

Share This Book

Strategy: Porter’s Five Forces + example Uber

Porter's Five Forces is an important strategy concept that helps to explain competitive forces within an industry and how profits are shared among the various participants of it including suppliers, competitors, buyers/customers and substitute products/services. This concept remains equally relevant for traditional firms as well as technology firms.

Porter’s Five Forces is a strategy tool that can help assess the impacts of company internal decisions within the external industry context. It is a tool applied on the main value creating aspects of a firm and not limited to a single department within a firm such as marketing and not even R&D.

Despite its relevance for technology industries, examples often come from traditional industries - a gap that this article will help to close. After explaining the Porter 5 Forces concepts, Part 2 of this article uses Uber as a comprehensive example to demonstrate the value of the 5 Forces for technology industries and firms.

Porter’s Five Forces can be a very useful strategy tool when making important strategic decisions within a firm and even prior to launching on an idea.

This article is structured in 2 parts:

Part 1: Explanation of the 5 Forces concept with a large number of short examples from different industries

Part 2: The in-depth, real-world example of Uber

In the end you will have gained great knowledge on both: the strategy concept as well as Uber (in one important aspect of their business model).

Part 1: Porter's Five Forces

What are the five forces (5f).

“The Five Forces is a framework for understanding the competitive forces at work in an industry and which drive the way economic value is divided among industry actors” ISC webpages.

Porter's Five Forces [source:  ISC webpages ]

The Five Forces are:

Bargaining power of buyers

Bargaining power of suppliers

Threat of new entrants

Threat of substitutes

Rivalry among existing competitors

The best Apps are not just Apps

They are the front-end to a winning business model, … and what are the five forces (5f) good for.

As an innovator wouldn’t you want to know if you will be profiting from your idea or if someone else (e.g. a key supplier, your distribution channel or your customer) will rapidly capture the majority of the economic benefits of your idea?

According research from Counterpoint, "In Q2 2021, it captured 75% of the overall handset market operating profit and 40% of the revenue despite contributing a relatively moderate 13% to global handset shipments.""

Note that there are considerable quarterly fluctuations to this figure with some quarters even better and others not as good. More importantly, take note that Apple's market share is far higher in the US than globally.

The Five Forces will help to assess & explain:

attractive vs less attractive markets,

identify opportunities and risks,

how profits within an industry are distributed,

extrapolate industry trends & anticipate changing trends.

Free Downloads

Get the Porter 5 Forces, Activity Map, Biz Model eBook & Canvas + other popular downloads into your inbox now:

You can unsubscribe anytime with a single click!

Thank you. You will receive a verification mail shortly. Once you confirm your email address you will receive an email with our most popular free download resources.

(1) Bargaining Power of Buyers (=customers)

Where buyers are powerful, profits are generally lower.  Buyer power  can lead to lower prices or having to increase costs by adding features, services, quantity in order to sell. Where sellers have too much power over buyers, opportunities can emerge for others.

Bargaining power can be exercised in different ways. We might be talking about negotiations as such, say a large multi-year supply contract or a supply contract for smartphone components. Bargaining power can also be exercised indirectly through purchase decisions of end customers, i.e buying from the lowest-priced company, deferring the purchase for a prolonged period, buying pre-owned (e.g. car) or not purchasing at all.

When you read the below, remember we are not just talking about end-buyers (=consumers). Apple is a seller to the end customers but they are also a buyer of components, such as displays, graphic processing units (GPUs), system on a chip (SoC). They are also a buyer of the assembly services of huge companies like Foxconn who are producing about 40% of all electronics world-wide and employ 1.3 million employees. Here is an image of  Apple’ supply chain .

Factors that influence buyer bargaining power:

Seller’s (supplier’s) switching costs: Switching costs can affect both sides, suppliers and customers (=buyers). Customer switch costs are more prominent (explaining this below). Buyers have more leverage where suppliers face switching costs

Manufacturers can face switching costs for upgrades of their productive assets to produce higher quality or higher performance outputs (e.g. steel, fuels, other commodities, electronic components, etc). Say they decide to not undertake one such upgrade as they don’t anticipate sufficient return. If the market moves on they may find having to discount their lower performance or quality products more than they had anticipated

Suppliers will generally pass their switch costs onto the buyer in the long run but economies of scale play a big role in this discussion as low scale will require higher unit cost increases (or longer amortisation times and profit compression)

Interesting questions arise when regulations stipulate higher safety or environmental standards (often giving a multi-year switch window). Who will pay for this? The customer or the seller? Who in the short and who in the long run? Some sellers may switch immediately so they can use it for advertising reasons or offer it as optional (payable) component in the early days

Differentiation of products

Where products are not differentiated (i.e. all competing products have pretty much the same value proposition), competition will be all about the price. Buyers will have the upper hand in particular where there are many competing products

In an undifferentiated product category with many alternates, incremental product upgrades/evolution may be mostly captured by customers without the ability to increase margins considerably

Buyer information availability:

The buyer may not have enough info to make good cost-benefit trade-offs. Products can be opaque or complex (insurance anyone?)

This can lead to the company with the biggest marketing spend exert power over the customer

Comparison and review pages, on the other hand, can erode this power somewhat (but these channels sometimes lose their independence as well)

Platform business models can help reduce  search costs

Power of distribution channels:

Large retailers, such as Amazon, Walmart) have enormous power over their suppliers

Apple opened their own stores (online and brick-and-mortar) to reduce their retailer’s power. They now dictate the terms (prices and maximum discounts) that normal retailers have to sign up to if they want to sell Apple products

Apple also is a distribution channel for music (Apple Music) and apps (App Store) and commands considerable margins over the suppliers (artists, labels, app developers) and is fighting court battles over these margins

Network effects can be powerful: switching away from Facebook costs you your network of friends and your photo/video gallery, etc (but multi-homing comes with low barriers, e.g. using Snapchat and Facebook at the same time). Platform business models build competitive (and bargaining) power through  indirect network effects

Bargaining leverage, particularly in industries with high fixed costs

Industries with high fixed costs (e.g. hotels, airlines) need to maximise revenue to contribute to their high fixed costs. This erodes their bargaining power esp if the industry has over-capacities and little differentiation

Some other factors are:

Buyer price sensitivity (or  demand elasticity )

Fragmentation of suppliers

Discretionary vs staples

Share of wallet

Recency and frequency of purchase

Access to limited resources: airport slots, top ad slots in Google  

Boost your knowledge

(2) Bargaining Power of Suppliers

Where suppliers are powerful they may make a larger profit margin than the company that integrates the inputs of several suppliers to sell to the end customer.

And there are cases where suppliers also sell directly to the end user as well as to another company. Samsung sell displays and other smartphone components to competitors as Apple (e.g.  iPhone X’s OLED display ) and use them in their own phones to sell to the end customer. Hotels sell their room directly to travellers and in some cases they wholesale rooms to the likes of Expedia at discounted rates.

A particularly successful supplier combination was the Microsoft, Intel duo in the PC space. Though many suppliers were involved in a typical PC, the biggest profit margins ended up in these two vendors' pockets when looking over the long run. Other vendors made good profits over certain periods but none of them anywhere close to “Wintel” if you look over the last 3 decades, many component manufacturers went out of business as newer technologies leapfrogged theirs (refer to supplier switching costs above).

Important factors that give suppliers bargaining/pricing power:

Customer’s switching barriers:

The classic examples for high  switching costs  are: inkjet printers, game consoles, pod coffee machines in the end-user space. But there are many more types of switching barriers, with Microsoft Windows leveraging several of them

More modern examples are smartphones. Switch from Android to Apple (or vice versa) and you will lose some of your apps and data, photos, etc or face large efforts to migrate things across . Some apps make it easy to use them on two different OSs at the same time but they make it difficult to export your data so you can switch away from the app itself. Other apps have proprietary data formats

Apple’s switching cost from one component vendor to another may be considered high, but they are a one-off cost of design and integration and are low on a unit cost basis given large volumes

Apple make strategic choices to source certain components from two different vendors in parallel

and they switch, where useful, between component vendors from one phone generation to the next

And they have insourced their chips in some cases

all of which limits the power of their suppliers

Data migration in enterprise level software combined with a number of other factors, such as training etc can lead to companies delay switching to more modern software for a long time

Microsoft has been found to build anti competitive switching barriers

Patent and industry standards

Owning patents that are part of the industry standard can make a very lucrative business

Qualcomm is a company that has powerful patent portfolio in the mobile communication space some of which are essential for fast mobile data transfer

And they make more revenue from their licencing business model than through direct component sales

They enforce their patents and licensing claims vigorously and are involved in a  multi-year lawsuit  (and counter lawsuit) process with Apple over this

Brand equity

Having a well-known brand can translate into a number of advantages, such as being able to price higher (= brand equity ), accounting for additional sales, being associated with a certain value proposition

It can also lead to stronger bargaining power with its own vendors (who doesn’t want to be a vendor for Apple and accept lower-than-usual margins for that ‘privilege’?)

Limited competition:

Where there is one (monopoly, e.g. new pharmaceuticals, rare earth) or few suppliers (oligopoly, e.g. large passenger aircraft manufacturers)

Many airports are quasi-local monopolies with steep barriers of entry

Supplier vs buyer concentration:

There are millions of fragmented crude oil buyers. And while the supply side is also fragmented they can coordinate themselves better on state and OPEC level. OPEC plus a number of other oil producers (esp Russia) have cut supplies and brought inventories down and prices up (though not quite where they would want it thanks to the US shale oil with the latter being a great example for the threat of new entrants). But clearly, the supply side can coordinate better when there is higher concentration

The airline industry had significant over-capacities and despite being higher concentrated than buyers had abysmal profits on industry-level. Though the buyers are not concentrated, their power is being aggregated by the global distribution systems (GDS) and the online travel agencies. They concentrate bargaining power through providing comparisons in prices. These are important (but by far not the only contributors) for airfares decreasing

Strength of distribution channels:

In some countries, a few large retailers (Walmart, Amazon) have huge leverage over their suppliers due to their scale

Shelf space in those large retailers is considered a valuable and scarce resource which they use to negotiate good terms for themselves with sellers

Online travel agencies  have considerable power and can charge commissions as high as 20-30% per sold room

Organisation of labour: labour is an important input. In some countries and industries labour unions are (still) powerful (though it seems to be eroding a lot)

After sales:

The seller may uphold warranties only under a prescriptive service or maintenance regime which may need to be sourced through the seller or authorised providers

Extensions / upgrades / diagnostic capabilities to existing customised systems may have a limited supplier base or require in-depth knowledge that only the OEM has

Other factors:

Dependency on the product: pharmaceutical companies, esp in the patent protection period, can dictate prices

Or more broadly services/goods with  inelastic demand  (in the short run): fuel, cigarettes, coffee

Buyer is not price sensitive, e.g. luxury products, recreational drugs

Goods/services not frequently purchased or low share of wallet (herbs, salt, etc)

Loyalty programs

Some ways that Apple uses to exert power over their supply side as well as their buyers

Our Flagship Course

(3) Threat of New Entrants

Winners attract others that wish to get a share of their success. A company that makes above industry-average profits will face the risk of new entrants that may either imitate bluntly or come up with similar (or even somewhat better) value proposals. This threat alone can keep a lid on the achievable profits. It may lead to having into continually add to the original value proposal with limited ability to increase prices.

New entrants will add new capacity, thus supply, to the market which will reduce prices (at least in the medium term). The pace at which competition can form depends on a number of factors listed below.

Barriers to entry:  Barriers to entry are economic costs that entrants pay which incumbents do not have to pay (nor had to pay). This is an important concept in economics, strategy and competition law. Having to work around patents or established (exclusive or restrictive) supplier or distribution agreements are just a few factors. Things like high start-up capital, learning curves, etc are not seen as barriers to entry from the theoretical  definition of this term . From a practical perspective, they do play a role. You can easily imagine that late movers may find it much more difficult to raise capital when there are already a few strong established players. Michael Porter points out the importance of  exit barriers  in combination with barriers to entry.

These  markets combine the attributes :

“Markets with high entry barriers have few players and thus high profit margins.

Markets with low entry barriers have lots of players and thus low profit margins.

Markets with high exit barriers are unstable and not self-regulated, so the profit margins fluctuate very much over time.

Markets with a low exit barrier are stable and self-regulated, so the profit margins do not fluctuate much over time.

High barrier to entry and high exit barrier (for example, telecommunications, energy)

High barrier to entry and low exit barrier (for example, consulting, education)

Low barrier to entry and high exit barrier (for example, hotels, ironworks)

Low barrier to entry and low exit barrier (for example, retail, electronic commerce)”

Here is an in-depth discussion on the  US vs Microsoft case (pdf)  and pro and cons on barriers to entry

Monsanto  is a company getting lots of attention from competition watchdogs

Economies of scale:  as scale goes up unit costs go down. This is another micro economic concept that holds true for most firms. Thus, incumbents can achieve higher profits as they have already achieved lower unit costs whereas new entrants have to  get to the scale  where their unit costs are comparable. Up to that point, they may not be able to have as low prices or have lower profits (thus less cash for further growth)

Industry profitability:  The higher industry-profits relative to other industries or the higher the profits of the incumbent relative to the industry, the higher are incentives for new entrants (and capital more accessible) and vice versa

Powers of incumbents: here are some dimensions which we have already explained where incumbents may already be ahead (which may deter entrants):

Network effects

Customer switching costs

Customer loyalty

Product differentiation

Expected retaliatory actions

As incumbents are further down the unit cost curve and likely more cashed up they can reduce prices when new competition emerges to make it hard for them (though there are limits posed by competition law in many countries). There can be all sorts of other retaliatory action

After sales markets

Many maintenance and asset management plans for capital assets (major plant components, generators, turbines, engines, vehicles or even cars) require access to the data and the ability (intellectual property) to analyse and interpret it in value-adding ways. Even where the data is documented, the IP to analyse often resides with the OEM who either has their own service arm or licensed (for a fee/royalties) service vendors

Government policy – to incentive or disincentive (e.g. through ignorance of market inefficiencies or lobbying by the incumbent) new entrants

Access to key suppliers (key input commodities), resources (e.g. airport slots) or distribution channels

(4) Threat of Substitute Products or Services

Let’s first clarify what a substitute is (and what it’s not). It is not the same product from a different company. Buying petrol from a different brand petrol station is not a substitute. Driving an electric vehicle is a substitute for using oil (it’s a substitute on the dimension of energy but not one on the dimension of transport). Using a train to commute to work is a substitute for using a car (on the transport dimension/industry).

Substitutes satisfy the same basic/economic need (or  utility ) using a different technology (in a narrower viewpoint coming from the same industry). Clayton Christensen’s concept of “ getting the job done ” extends this definition. E.g. there are many things that compete for your recreational time which may be suitable to substitute for each other. In this case, the substitutes may be coming from an entirely different industry.

Factors affecting the  threat of substitutes :

Price-performance comparison:  in both an industrial substitute scenario as well as a consumer scenario price-performance trade-offs matter

How much time does driving to work save you compared to using public transport or UberPool? And how much are you paying more (per trip and per month/year?). How will the price-performance trade-off shift, e.g. traffic speed slowing down due to increased population (permanent factors) or roadworks (temporary factors)? How much would the trip cost need to increase (e.g. due to fuel price increases)? The key is that for different people the thresholds look different.

How much further does traffic need to slow down before more people switch to share bikes, share cars, ride-hailing or alternate private transport solutions? These are essential questions for companies like Zipcar, Uber, Ofo in the decision which cities to enter

As smartphone cameras become better they start becoming a substitute for high-end digital cameras for an increasing amount of people (though surely not for professionals) but more for ambitious amateurs. High-end digital cameras started substituting for professional filming equipment

Buyer’s switching costs  (see above) affects the price-performance trade-off as it adds an additional cost to the buyer’s cost of the substitute

For both industrial buyers and consumers high  switching costs  can prevent or delay switching to substitutes

The  efforts involved (ease of substitution)  and other factors can translate into actual or perceived additional costs of the substitute

Purchase factors  for consumers:

Product differentiation:  the more a product is differentiated and has unique value propositions, the more difficult it is to find substitutes and to make a price-performance trade-off and thus to switch

Number of substitute products  available on the market

Developing a simpler substitute that scores better on the price-performance trade-off can be a great starting point for innovators. This is particularly true if you are looking to develop a substitute for high-profit industries or where products have outstripped the user’s typical requirements.

(5) Rivalry Among Existing Competitors

Not all industries are equal. Some are much more competitive than others. Prof Porter has identified the settings that frequently lead to fierce competition.

Ingredients of highly competitive industries are:

Many competitors of similar size  in the industry (i.e. level of fragmentation / low degree of concentration within the industry) can lead to prolonged competition with most innovations being harvested by buyers/consumers. Industries with only a few competitors of similar size can lead to oligopolies

Slow aggregate industry growth  (on the demand side) can lead to rivals competing for market share as the “only” way to grow thereby instigating a nil-sum game where everybody tries to get market share from someone else

High fixed costs , i.e. where idle capacities come at high cost leading to pressure to sell at low margins to generate revenue contribution to the cost base

High exit barriers  (see above) where the productive assets remain in the market due to their high remaining values

Highly committed players , e.g. industries of national interest (airlines) or prestige (smartphones)

Where  competitors have different goals or ways of measuring success . Chinese heavy industries, e.g. steel, have been supported by their government for their strategic importance in urbanisation. Their excess capacities used as exports were large enough to subdue world steel prices. Amazon is  measuring financial success differently  to its competitors, funding their growth through razor-thin margins, best summarised in Jeff Bezos’ quote “Your margin is my opportunity”

Part 2: Porter's 5 Forces example Uber

Let’s start with a brief recap of Uber’s value proposition in comparison to its rivals. This plays a role in a number of the forces.

Uber’s value proposition is distinctly different to other forms of transport (=substitutes – force 3) but very similar to other ride-hailing companies (=competitors – force 5)

(1) Bargaining Power of Buyers (=riders)

Bargaining power of customers: on aggregate reasonably high at this stage as there is strong ride-hailing competition, alternate means of transports, taxis and high car ownership. Beyond a certain market share, Uber may have a better pricing position. On certain routes (e.g. airport - CBD) and popular late weekend night routes, the bargaining power of customers is lower

Switching barriers for the demand side:  are low. Similar to the drivers, customers are multi-homing. But this may change if the industry ends up becoming a winner-takes-(almost)-all. Due to the indirect network effects, waiting times would increase for competing platforms

Value proposition for customers:  are compelling. Lower  transaction and search costs, shorter waiting times and lower costs. This is in comparison to other means of transport. But in comparison to other ride-hailing companies there is very little differentiation, thus price will play a big role (as their brand value increases, so can their pricing power)

Buyer information availability: high. Those people who know about Uber also know Lyft and other ride-hailing companies (provided they choose to compare)

Power of distribution channels: low. In this case, we are talking about the app and all competing apps can be equally easily installed. All competing ride-hailing can be used equally easily. If Uber becomes the dominant player due to their network effects, then they become the predominant distribution channel for all (or the majority) of hailed rides, amplifying their advantage. (App stores as a distribution channel for ride-hailing apps are not a consideration in this equation as there are no differences)

(2) Bargaining Power of Suppliers (=drivers)

Bargaining power of supply side: is weak at this stage as there is no unionisation, something that Uber is closely monitoring. We have not yet seen elasticity data for the supply side, i.e. how much higher would hourly rates need to be to attract X number of new drivers? A concept by professor Judy Chevalier in an Uber study , called “reservation wage,” though is a good starting point. But there is lots of discussion in the public space of Uber underpaying drivers (Uber of course states the opposite). This public perception may strengthen the bargaining power of drivers, esp if they are to be considered as employees and receive entitlements. As you know, this is an evolving space.

Switching costs of the supply side: are low. Some drivers are multi-homing by driving for Uber and Lyft (or other ride-hailing companies) at different times. But given hourly wages are similar (and there is no reported shortage of drivers), there is no significant bargaining power gain for drivers at this stage

Value proposition for supply side: compelling. Due to the indirect network effects and the scale that Uber has reached in some cities, they can offer low idle times which lead to comparable per hour wages as taxi drivers but in less absolute time on the street. This may also increase switching costs for drivers, if Uber takes a larger market share. Uber also claims that earnings have improved through UberEats

Barriers to entry for the supply side:  It is easy to join Uber and other ride-hailing companies as a driver. But the lower switching costs make it easier for new drivers to join (no multi-year apprenticeship, certificates, etc) effectively reducing the bargaining power of the supply side and – interestingly – increasing the value proposition for new joiners at the same time

The  bargaining power of drivers is low but likely rising : Slowly things have improved for drivers over the last 5 years. While one cant extrapolate from this that things will always get better, it seems still probable that the bargaining power of drivers improves (slowly)

(3) Threat of new entrants

Barriers to entry:

On the surface, they are low. Anyone can program an app. But will you be able to scale it up?

Any new entrant needs to get to critical mass. This is often costly in terms of acquiring the supply side and the demand side

Uber has spent billions on demand generation. Customer acquisition costs are very high as seen in the battle with Didi. Will investors be willing to fork out capital for a new entrant to fight an already established brand like Uber?

Will a new entrant be able to get to critical mass on the driver side to provide a comparable value proposition (e.g. low waiting times)?

Could new entrants come from unexpected areas? Maybe Apple, Microsoft, Ford, Toyota, Volkswagen or other companies that already have a huge customer bases and a brand who can mobilise them at low marginal costs? Possible, but Uber is moving into many adjacent/complementary areas, such as freight, meal delivery that may lead to better asset utilisation which other players may not want (or be able) to enter.

Economies of scale:

Can Uber scale up in a way that they have lower unit costs that makes it very hard for new entrants? The answer likely is yes

Can this help Uber increase their lead? Same drivers could work for UberEATS or other conceivable ideas (“the Uber of X”)

If they are able to negotiate better terms for operational, maintenance and servicing for their drivers, this is something that can bring unit cost further down

Some of the economies of scale will pertain even with driverless cars (and most importantly the indirect network effects)

Brand equity:  while tarnished temporarily, it is still a major asset and in the long-term

Expected retaliatory action:  no doubt, Uber will fight hard against new entrants as they have fought hard in the cities they have entered. This will discourage investors to support new entrants in markets where Uber is strong (mainly the US)

The most likely scenario here is not that another global Uber emerges but rather several local competitors. A lot of locally-focused entrants (possibly with slightly differing value propositions) may dilute Uber’s strength (i.e. financial resources) enough to capture enough market share in those regions

(4) Threat of substitutes

Car sharing  companies such as  Zipcar

Self-driving cars : many people debate what self-driving cars will mean for the entire transport industry. We are not going to join this speculation. As you certainly know, Uber is investing a lot in self-driving technology themselves

Better public transport: seems very unlikely. We have not heard of any large cities with any success stories on this front (sadly)

More people  working from home:  it is hard to assess if mobility requirements will reduce due to technological penetration but worth keeping an eye on

Bike sharing  can become a better option in cities that are growing fast and traffic congestion becomes an issue

The threat of substitutes is low due to the very different value proposition of the substitutes – check the map above.

(5) Rivalry among competitors

Rivalry is stiff. Though there is no as large player if you look globally, there are many strong players in various geographies:

Ola in India,

Didi has managed to fend Uber off in China,

Lyft is now concentrating its resources to the US

Other competitors are emerging in various locations

A lot of locally-focused entrants may dilute Uber’s strength (i.e. financial resources) enough to capture enough market share in those regions

It is likely that the competition will have to be taken very serious by Uber and it may keep a cap on prices and possibly even on Uber’s pace of growth

Uber itself is expanding into several adjacent areas, such as freight, food delivery, self-driving cars and some other. There are complementary, i.e. synergetic, effects that can increase Uber’s competitive moat

The Complete Guide to the Revolutionary Platform Biz Model

IKEA Porter’s Five Forces Analysis

Porter’s Five Forces model is “a generic framework that deconstructs industry structure into five underlying competitive forces or variables” [1] . IKEA Porter’s Five Forces are represented in figure below:

Porter’s Five Forces

Threat of new entrants in Porter’s Five Forces Analysis

Threat of new entrants to furniture and home appliances manufacturing industry in general is significant. The following set of factors, among others affects the intensity of threat of new entrants into the industry.

1. Lack of regulatory or technological entry barriers. There are no legal or regulatory barriers to enter the furniture industry. Moreover, knowledge barriers are not substantial as well because furniture producing processes do not involve advanced know-how that is difficult to replicate.

2. Economies of scale. IKEA benefits from the economies of scale to a great extent internationally and this advantage allows the Swedish furniture chain to maintain highly competitive prices. No new market entrant would be able to utilize economies of scale to IKEA’s extent and thus, competing with IKEA on price level remains as a highly challenging, if not impossible task. Such a situation discourages potential new players to enter the industry.

3. Distribution channel barriers . Although there are no regulatory or technological entry barriers as discussed above, distribution channel entry barrier exists. It took more than seven decades for the Swedish furniture chain to establish its global distribution network that comprises more than 500 locations in 63 countries. Without such an extensive distribution network it will be hard for new market entrants to present any real threat for IKEA.

Bargaining power of buyers in Porter’s Five Forces Analysis

Bargaining power of buyers in furniture and home appliances manufacturing industry is huge. The following factors increase buyer bargaining power:

1. Absence of switching costs for customers . Currently IKEA lacks an ecosystem of products and services that is able to retain the customer through customer switching costs. Therefore, customers are able to switch to an alternative furniture seller without additional costs. The absences of switching costs increases customer bargaining power to a considerable extend.

2. Price sensitivity . IKEA pursues cost leadership business strategy and this strategy has certain implications on customer bargaining power. Specifically, price sensitivity is positively correlated with customer bargaining power in a way that if the furniture retailer is unable to sustain its competitive prices it may lose customers. Alternatively, for a business pursuing product differentiation business strategy, such as Apple Inc. higher product prices do not usually alienate customers because the brand value proposition is advanced features and characteristics of products, not the cheapest price.

3. Size and concentration of buyers compared to suppliers. Buyer size and concentration is positively correlated with their bargaining power. In the global furniture industry the size and concentration of buyers compared to suppliers is significant and accordingly, buyers possess a considerable bargaining power.

Bargaining power of suppliers in Porter’s Five Forces Analysis

The bargaining power of IKEA suppliers is limited. The following considerations relate to the supplier bargaining power:

1. Importance of volume to suppliers . IKEA is the largest furniture retailer in the world and accordingly it can place high volume orders to many suppliers. Volume of orders is important to any supplier to grow their business. For IKEA’s many suppliers IKEA is their largest customer if not the only customer. Accordingly, due to its high volume of orders the Swedish furniture chain possesses immense bargaining power in relation to its suppliers and exercises this power extensively.

2. Limited potential for forward integration for suppliers . As mentioned, the home improvement and furnishing chain has advanced global distribution channel with more than 500 locations in 63 countries. It is highly challenging for suppliers to pursue forward integration strategy because of inability to develop distribution channel of a similar scale. This fact limits supplier bargaining power.

3. Size of suppliers . IKEA produces some of its products in-house, but the majority of products (89%) are sourced from external suppliers across the globe. [2] The world’s largest furniture retailer purchases from hundreds of suppliers worldwide and no individual supplier accounts for more than 10% of purchases. Miniature size of suppliers in relation to IKEA has a detrimental impact on their bargaining power.

IKEA Group Report contains a full analysis of IKEA Porter’s Five Forces Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on IKEA . Moreover, the report contains analyses of IKEA leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of IKEA marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] Nemati, H.R. & Barko, C.D. (2004) Organisational Data Mining: Leveraging Enterprise Data Resources for Optimal Performance, IGI, p.29

[2] Inter IKEA Holding B.V. Annual report FY21 

Porter’s 5 Forces analysis Case Study

Threat of new competition, threat of substitute products or services, bargaining power of customers (buyers), bargaining power of suppliers, intensity of competitive rivalry.

eHarmony operates in a unique environment and that is why there has been a threat of new competition. As much as Match remained the company’s biggest competitor, other new companies were entering the market with new products specifically designed for different segments of the market. Competitors were always in full attack mode which made the company to review its options.

This point can be reinforced by the fact that eHarmony had to invest in marketing to support its membership base. New entrants were mostly seen in the personals segment like Yahoo Facebook, MySpace and others. Competitor types have also been changing as time goes by which explains why the company will continue facing the threat of new competition.

The match making industry has always been changing based on new customer needs and preferences. This means that the threat of new products has always been there. eHarmony had to put up a fight with new products and services like paid do it yourself sites, free do it yourself sites, niche sites and online social networks.

Consumers’ preference and tastes are always changing and that is why these sites were coming up with new products to challenge eHarmony’s market. As far as the threat of substitute products is concerned, most of these sites were concentrating on the market segment that was not covered by eHarmony like same sex relationships and specific age sets.

With the increasing popularity of the internet, most customers have been able to access information thereby being knowledgeable on different aspects. This explains why eHarmony found itself in many lawsuits from different customers who felt that they were being secluded yet the company was focusing on a different market segment with its unique products.

In fact, customers were able to choose sites that they found to be comfortable to them based on their preference which shows that they have a bigger bargaining power.

Niche sites were in competition with eHarmony because they saw a gap that had not been exploited based on the demands that were being made by different customers. eHarmony had to invest a lot of money in research and development to meet the changing needs of customers for long term sustainability.

eHarmony had to invest substantial amounts of money in the market to continue being relevant. This means that the bargaining power of suppliers had also increased as time went by. The most notable suppliers who had increased their bargaining power were marketers because of a wide market. In fact, the bargaining power of suppliers had increased tremendously because of different and available options.

The company could not operate alone and that is why it had to rely on a large number of suppliers for proper provision of services to diverse and distinct customers. Just like in the case of customers, there was free access to information that enabled suppliers to be knowledgeable on different market aspects thereby increasing their bargaining power.

The intensity of competitive rivalry on the market share of eHarmony could not be underestimated and that is why the company had to support the growth of its membership base by investing heavily in marketing.

Competitive rivalry had increased because of different competitor types that had emerged with new products targeting specific niche markets. For instance, online social networks were providing an important substitution that was a threat to the company’s products. On the other hand, direct competitors like Match and Yahoo were intensifying their activities in the market with an aim of reducing eHarmony’s market share.

• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2019, December 18). Porter’s 5 Forces analysis. https://ivypanda.com/essays/porters-5-forces-analysis-case-study/

"Porter’s 5 Forces analysis." IvyPanda , 18 Dec. 2019, ivypanda.com/essays/porters-5-forces-analysis-case-study/.

IvyPanda . (2019) 'Porter’s 5 Forces analysis'. 18 December.

IvyPanda . 2019. "Porter’s 5 Forces analysis." December 18, 2019. https://ivypanda.com/essays/porters-5-forces-analysis-case-study/.

1. IvyPanda . "Porter’s 5 Forces analysis." December 18, 2019. https://ivypanda.com/essays/porters-5-forces-analysis-case-study/.

Bibliography

IvyPanda . "Porter’s 5 Forces analysis." December 18, 2019. https://ivypanda.com/essays/porters-5-forces-analysis-case-study/.

• Microsoft-Yahoo Merger Review
• The Reasons of Yahoo’s Success
• Yahoo! Company History
• Wal-Mart’s Sustainability Strategy
• WaterForPeople.org Tech Award Application
• XYZ Company
• CVP Analysis and Pro forma Statement for Prime Component
• Google.cn in Chinese Economy

Log in using your username and password

• Search More Search for this keyword Advanced search
• Latest content
• Current issue
• For authors
• BMJ Journals More You are viewing from: Google Indexer

You are here

• Online First
• Prevalence of sexually transmitted infections in women of the Czech Republic Armed Forces: a cross-sectional pilot study
• Article Text
• Article info
• Citation Tools
• Rapid Responses
• Article metrics

• http://orcid.org/0000-0003-1555-4359 Lubos Karasek 1 , 2 ,
• J Smetana 1 ,
• P Svobodova 2 ,
• J Smahelova 3 ,
• R Tachezy 3 ,
• I Kiss 2 and
• D Nejedla 4
• 1 Department of Epidemiology , Military Faculty of Medicine, University of Defence , Hradec Kralove , Czech Republic
• 2 Department of Gynecology 3rd Faculty of Medicine of Charles University and Military University Hospital Prague , Military University Hospital Prague , Prague , Czech Republic
• 3 Department of Genetics and Microbiology , Faculty of Science, Charles University, BIOCEV , Vestec , Czech Republic
• 4 Department of Microbiology , Military University Hospital Prague , Prague , Czech Republic
• Correspondence to Dr Lubos Karasek, Department of Gynecology, Military University Hospital Prague, U Vojenské nemocnice 1200, 16902, Prague, Czech Republic; karasek.lubos{at}uvn.cz

Introduction Sexually transmitted infections (STIs) are an everlasting health issue globally. The military environment is recognised as a high-risk setting. Human papillomavirus (HPV), Chlamydia trachomatis and Neisseria gonorrhoeae are the most frequent STIs worldwide. This prospective cross-sectional pilot study focuses on the prevalence of selected STIs in the female population of the Czech Republic’s Armed Forces.

Methods C. trachomatis , N. gonorrhoeae and HPV detection and genotyping were performed between August 2020 and December 2022 in 141 women. Participants were divided into three groups according to their military status—recruits (n=72), active soldiers (n=25) and control civilian group (n=44). Cervical smear tests were performed, and data on STI risk factors were obtained through a questionnaire.

Results A significant difference in the HPV prevalence between recruits (64.5 %) and both active soldiers (46.4 %) and civilians (47.3 %) was found when adjusted for age (p=0.007 and p=0.01, respectively). Lower age of coitarche (median 16; p=0.005) and smaller agglomeration origin (p=0.013) were reported for military recruits. No difference was proven in other researched risk factors. Associations between HPV detection and the higher number of sexual partners (p=0.013), early coitarche (p=0.016) and single marital status (p=0.002) across the groups were observed. Not a single case of N. gonorrhoeae was detected in any of the 141 participants. The prevalence of C. trachomatis did not differ significantly between the three evaluated groups—recruits, control civilian group, and active soldiers (5.6%, 2.3%, 0%, respectively; p=0.567).

Conclusions This pilot study showed a significantly higher HPV prevalence in female military recruits compared with both active military and civilian women. Recruits reported earlier coitarche which is a strong STI risk factor. Further study is needed to expand on the findings of this pilot study and generate data to support adjustment of STI preventive measures within the Czech Republic Armed Forces.

• EPIDEMIOLOGY
• Epidemiology
• Infection control
• Infectious diseases & infestations

Data availability statement

Data are available upon reasonable request.

This is an open access article distributed in accordance with the Creative Commons Attribution Non Commercial (CC BY-NC 4.0) license, which permits others to distribute, remix, adapt, build upon this work non-commercially, and license their derivative works on different terms, provided the original work is properly cited, appropriate credit is given, any changes made indicated, and the use is non-commercial. See: http://creativecommons.org/licenses/by-nc/4.0/ .

https://doi.org/10.1136/military-2023-002611

Statistics from Altmetric.com

Request permissions.

If you wish to reuse any or all of this article please use the link below which will take you to the Copyright Clearance Center’s RightsLink service. You will be able to get a quick price and instant permission to reuse the content in many different ways.

WHAT IS ALREADY KNOWN ON THIS TOPIC

Military service is perceived as a risky environment in terms of sexually transmitted infections (STIs), and a higher prevalence of STIs in the military was shown in several studies.

WHAT THIS STUDY ADDS

This study researched human papillomavirus (HPV), Chlamydia trachomatis and Neisseria gonorrhoeae prevalence in women of the Czech Republic Armed Forces and did find a significantly higher HPV prevalence in military recruits when compared with women of Armed Forces and the general population.

The group of recruits seems to be at higher risk of acquiring STIs—suggesting that further research would be appreciated to confirm the evidence.

HOW THIS STUDY MIGHT AFFECT RESEARCH, PRACTICE OR POLICY

Preventive measures against STIs across the military forces should be considered.

Introduction

Sexually transmitted infections (STIs) are a frequent and everlasting challenge for both individuals and society at large, possibly causing serious health issues. Human papillomavirus (HPV) and Chlamydia trachomatis are perceived as the most frequent ones. HPVs can be divided into two large subgroups: low-risk HPV (LR HPV) causing benign skin and mucosal warts and high-risk HPV (HR HPV) being the main cause of anogenital and epithelial dysplasia and cancer, most frequently cervical and in the last decades also oropharyngeal cancer. 1–3 C. trachomatis is a common cause of urogenital infections and subsequently also deteriorated fertility. 4 5 Neisseria gonorrhoeae is not as frequent of a pathogen as those mentioned earlier, but the clinical consequences of its infection could be serious, and the frequency in the population is rising. 6

Military service is perceived as a risky environment in matters of STIs. Historically, this poor reputation has been attributed to specific life conditions, minimal knowledge of the STI pathogenesis and the absence of preventive measures. 7 With advances in medicine such as diagnostic testing, therapeutic options and health education, and major changes in the military forces conception, the unfavourable epidemiology of the STIs in Armed Forces has changed. 8 The risk of acquiring STI in the army is lower than in the past. However, data show that the prevalence of STIs is still higher compared with the general population. 9–11 The prevalence of the STIs in the army is not only dependent on the military environment, but it is also influenced by the STI status of members joining the military service. Agan et al showed that HPV seroprevalence among male military recruits was higher than that reported among civilian men. 12 Most reliable data on this matter come from the US military; however, data available from Central Europe are scarce. 13 14 Furthermore, the available data are largely limited to male populations despite women being at greater risk of STIs. 15

No data on STIs are available for the Army of the Czech Republic. To date, there is no mandatory screening for STIs, either at the time of entry or throughout the military service period. Considering the higher risk of STIs posed to women, we aimed to evaluate the epidemiology of common STIs in female recruits and soldiers of the Czech Republic army and compare prevalence with a sample from the civilian population.

The prospective cross-sectional pilot study was performed in theMilitary University hospital Prague between August 2020 and December 2022. Women ranging in age between 18 years and 40 years (N=141), formed the part of the study. They represented three different population groups, following the groups compared in the study. The first group (G1) comprised recruits, women who were in the process of entering the army and visiting the gynaecology outpatient department as part of their general medical entry evaluation/screening. The second group (G2) comprised female soldiers undergoing an annual gynaecological examination. The third group (G3), stated as the control group, constituted of civilian women without connection to the army, also undergoing an annual routine examination in the Military University Hospital Prague. Participation in the study was voluntary. The participants were informed about the study protocol including vaginal examination, and a written consent was obtained. Subjects’ data were numerically pseudoanonymised. Subsequently, a follow-up of women with positive STIs’ test was provided. An appropriate antibiotic regimen was prescribed in cases of C. trachomatis positivity, and an additional Pap smear and colposcopy were recommended to HR HPV-positive participants. Exclusion criteria were stated as recently (1 year or less) known and/or treated STI infection and dysplastic or neoplastic gynaecological conditions of the vulva, vagina and uterine cervix or body. Women with a history of hysterectomy or trachelectomy were also excluded from the study. Patients with cured vulvar, vaginal, cervical or uterine disease and/or a medical history of conisation or other forms of therapy for cervical disease more than a year ago were included in the study.

Specimen collection and processing

Samples were taken from women during a routine gynaecological examination. Two smears were taken from the uterine cervix, covering both endocervix and exocervix, using three brush rotations. First, a mini tip brush in a kit with liquid amies preservation medium eSwab (Copan, Brescia, Italy) was used for C. trachomatis and N. gonorrhoeae . Then the smear for HPV detection was performed by a FLOQSwabs brush (Copan) and inserted into the transport tube with 2 mL PreservCyt solution (Roche, Rotkreuz, Switzerland). Samples were taken and handled by two similarly experienced clinicians using a standardised sampling technique. Both specimen tubes were then stored at a temperature of −20°C until the laboratory processing.

At the enrolment to the study, women were asked to fill in a questionnaire to assess demographic data and known STI risk factors. The factors assessed included the age of coitarche, the number of lifetime sexual partners, the number of sexual partners in the last year, a history of Pap smears, HPV vaccination and STIs. Methods of contraception, addictive substance usage, education level, marital status, original urban area and religion status were also evaluated.

HPV detection and genotyping were performed in the Laboratory of Molecular and Tumor Virology, Charles University, BIOCEV, Vestec, Czech Republic.

The tubes with samples and collecting tips were thoroughly vortexed to gain maximum cell load and pelleted by centrifugation. The dilution volume used was 200/400 µL depending on the size of the pellet. Isolation of the DNA was performed using the QIAamp DNA Mini Kit (Qiagen, Hilden, Germany) following the manufacturer’s instructions. DNA was eluted in 100 µL of AE buffer. The quality and quantity of DNA were measured spectrophotometrically (NanoDrop Technologies, Wilmington, DE). The volume was adjusted to achieve a maximum concentration of 50 ng/µL DNA.

The HPV detection was performed using commercial Anyplex II HPV 28 detection kit (Seegene, Seoul, South Korea). This multiplex real-time PCR-based method targets the L1 region of the viral genome and allows simultaneous genotyping of 28 HPV types and an internal control. Two PCR reactions were performed for each sample to detect the 19 HR HPV types (HPV 16, 18, 26, 31, 33, 35, 39, 45, 51, 52, 53, 56, 58, 59, 66, 68, 69, 73, 82) and the 9 LR HPV types (HPV 6, 11, 40, 42, 43, 44, 54, 61, 70). Negative and positive controls were included in all PCR runs.

Detection of C. trachomatis and N. gonorrhoeae was performed in the Department of Clinical Microbiology of the Military University Hospital Prague. Isolation of the DNA was carried out by an automated nucleic acid extracting device, Nextractor NX-48 system (Genolution, Seoul, South Korea), using 600 µL of lysis solution and 100 µL of elution solution per sample. Detection was performed by real-time PCR using GeneProof C. trachomatis and N. gonorrhoeae PCR Kit (Geneproof, Brno, Czech Republic).

Statistical analysis

Statistical analysis was carried out using SPSS Statistics V.21. The Fisher exact test and standard χ 2 test were used to determine the difference in the STI prevalence between the groups. A non-parametric approach was used to compare the difference in age between the groups due to abnormal age distribution and the small size of the groups. Marginal age values were not implemented, and direct adjustment for age using a study population was applied in order to exclude the differences in age structure between the groups. Bivariate analysis and Kruskal-Wallis test or χ 2 /Fisher exact test were used to evaluate if the groups differed in exposure to risk factors for STIs. For statistically significant results, the post hoc test or Bonferroni correction was applied. The level of definitive statistical significance was p<0.05.

A total of 141 women were enrolled in the pilot phase of the study: recruits (G1, n=72), active soldiers (G2, n=25) and control civilian group (G3, n=44). The median for age was 25.5 years in G1, 27 years in G2 and 28 years in G3. The difference in age median between groups G1 and G3 was statistically significant (p=0.007).

No N. gonorrhoeae case was found in the whole study population. The prevalence of C. trachomatis was 5.6% (4/72) in G1, 0% in G2 and 2.3% (1/44) in G3. There was no statistically significant difference between the groups (p=0.567).

The overall HPV prevalence in the studied participants was 51.8% (73/141), and it was age dependent across the study ( figure 1 ).

• Download figure
• Open in new tab
• Download powerpoint

Prevalence of human papillomavirus DNA by age and study group.

The HPV prevalence in G1 was 55.6% (44/72), 48% (12/25) in G2 and 47.7% (21/44) in G3. After adjusting for age, the difference in HPV prevalence between G1 and both G2 and G3 was significant, 64.5 %, 46.4 %, and 47.3%, respectively (p=0.007 and p=0.01, respectively).

The prevalence of LR HPV types was 34.7% (25/72) in G1, 20% (5/25) in G2 and 22.7% (10/44) in G3. HR HPVs were more prevalent, 47.2% (34/72) in G1, 36% (9/25) in G2 and 36.4% (16/44) in G3. Differences between G1 compared with G2 and G3 in both LR HPV and HR HPV were statistically significant after adjustment for age. LR HPV prevalence in G1 was 39.8 %, 15.8% in G2 and 18.4% in G3 (p<0.001). HR HPV prevalence in G1 was 51.8 %, 29.8% in G2 and 28.6% in G3 (p<0.001; p=0.046, respectively). Infection with multiple HPV types (those in which two or more HPV types had been detected) was revealed in 43.0% (31/72) of G1, 20% (5/25) of G2 and 18.2% (8/44) of G3 participants. This shows a significantly higher prevalence of multiple HPV infection in G1 compared with G2 and G3 (p=0.040 and p=0.006, respectively). The most prevalent LR HPV type through the groups was HPV 42 (9.2 %). HPV 6 and 11 were each detected only once (0.7 %). In the case of HR HPV, the most frequent types were HPV 53 and 56 (both 9.2 %) with HPV 16, 58 and 59 (7.8 %) being less common ( table 1 ).

• View inline

HPV genotype frequency detection

Coitarche significantly differed for G1 with the lowest median at 16 years of age compared with the median of 17 years in G2 (p=0.005). The number of lifetime sexual partners and the number of sexual partners in the last year were not different between the groups (p=0.519 and p=0.114, respectively) ( table 2 ).

Analysis of ordinal STI risk factors in groups

Fewer women from G1 (47 %) reported living in a city larger than 100 thousand people compared with G2 (76 %) and G3 (69 %) members, and the difference was statistically significant (p=0.013) in contrast to the frequency of preventive Pap smear checks in the last 2 years (p=0.137), history of STIs (p=0.056), vaccination against HPV (p=0.751), usage of condom with a risky partner (p=0.573) or usage of contraception (p=0.664) where no statistically significant difference was found between the groups. Groups did not statistically differ in smoking (p=0.052) or alcohol consumption (p=0.393). The obtained data also did not show any difference in marital status (p=0.281), religious status (p=0.649) or education level (p=0.096) ( table 3 ).

Analysis of nominal STI risk factors in groups

Promiscuity was confirmed to be a strong risk factor as women with three or more sexual partners in the last year were significantly more likely to test positive for HPV than those with two or less partners (59.5% (69/116) vs 5.6% (1/18); p=0.013). Early age of coitarche was also proved to be a risk factor. Lower age at the time of the first sexual intercourse was positively correlated with a higher prevalence of HPV infection (p=0.016). Marital status showed an association with the HPV prevalence. Married women had a lower chance of testing HPV positive than single or divorced women (22.2% (4/18) vs 56% (56/116), respectively; p=0.002). Concerning regular gynaecological examinations, women with a Pap smear in the last 2 years were more likely to test HPV positive (56% (70/125) compared with women without Pap smear 18.8% (3/16); p=0.006). For the rest of the risk factors mentioned above, no association with higher HPV prevalence has been proven. HPV vaccination as a protective factor was analysed only for HPV types included in all accessible vaccines (thus, types 6, 11, 16 and 18). Vaccinated women had lower HPV 16 prevalence compared with non-vaccinated (1.9% vs 11.5%) (p=0.040). There was no statistically significant difference in HPV 6, 11 and 18 prevalence between vaccinated and non-vaccinated women (p=0.379, p=1.000 and p=0.402, respectively) ( table 2 ).

Answering the main question of the study, we did show a significant difference in the HPV prevalence between recruits (64.5 %) and both active soldiers (46.4 %) and civilian control group (47.3 %) after the direct age adjustment. Female recruits were also significantly more prone to multiple HPV-type infections. This is consistent with the work of Agan et al who showed that men entering army were in higher risk of testing seropositive for STIs. 12

We did not find any difference in STI prevalence between active female soldiers and civilian women, and thus, we did not support the studies claiming a higher prevalence of STIs in soldiers. 9 12 Even though the prevalence of C. trachomatis and HPV between the groups differed, low number of subjects seems to be the possible limitation for obtaining significant data.

The total HPV prevalence in the study was 51.8% with 47.7% for G3 alone. Taking into account a different age distribution, this is higher than the prevalence obtained in the Czech Republic screening population. 16 There was a slight shift in age between the studies, considering the HPV peak prevalence. The studies did not differ in the HPV-type frequency with HPV 16 being the most frequent HR HPV and HPV 42 the most frequent LR HPV.

C. trachomatis prevalence in the general population of the Czech Republic is not known. There were 1803 reported cases in 2022, but no data on asymptomatic infections are available. 17 The prevalence in this pilot study was 5.6% in G1, 0% in military G2 and 2.3% in G3 which stands for the civilian control group of women. Literature on the topic indicates a similar frequency of C. trachomatis in the general population in Central Europe. German study estimates the highest prevalence of 2.3% among 18–24-year-olds. 18

Groups in our study differed in the age of coitarche. Women from G1 were more prone to start their sexual life at an earlier age. Taking this strong risk factor into consideration, this could possibly be the reason for the detected higher HPV prevalence in military recruits. Participants from G2 and G3 came from cities with over 100 thousand inhabitants more frequently compared with G1. Available data related to a possible association between age of coitarche and demographic urban characteristics are contradictory, and no clear link is confirmed. 19–21

In our study, we have detected a significant association between an increased prevalence of HPV and a higher number (≥3) of sexual partners in the last year. An early start of the sexual life and the single or the single/divorced marital status had also increased the risk of HPV acquisition. All of these findings are consistent with the findings of other researchers. 22–24 Women regularly undergoing Pap smear test were more likely to test HPV positive. This is rather surprising since we expect these women to have easier access to prevention and HPV vaccination. When researching HPV vaccination status among participants, we were not able to obtain detailed data on vaccine type and year of vaccination. Full statistics were performed only for the HPV types included in all the accessible HPV vaccines, thus HPV 6, 11, 16 and 18. Women vaccinated against HPV by any vaccine were less likely to be tested positive for HPV 16. No significant difference was proven for HPV 6, 11 and 18 between vaccinated and unvaccinated. This result could be explained by a lower frequency of the latter HPV types and limited study population.

This study had two main limitations. Regarding the sample size of the study, we managed to enrol 141 women across the studied groups with the smallest number of individuals (n=25) in the military. The second limitation is the significant age difference between the groups, leading to the necessity of direct age adjustment. The group size and unbalance in the age distribution should be targeted in the future phase of the study to enable more precise statistical analysis. A lower number of participants and refusal of the study can be caused by the necessity of a gynaecological examination to obtain cervical smears. New strategies including urine examination and self-collected vaginal samples should be considered to address the responders. Studies using the previously mentioned techniques performed mainly in the US military report higher numbers of participants. 9 11 12 25–27 In comparison, European studies usually report data on smaller groups. 13 14 In general, most of these studies refer to men or both genders together, missing the focus on women separately. Direct attention to female soldiers’ STI epidemiology is a strong point of this study.

This prospective cross-sectional pilot study researched the prevalence of the most common STIs in the female Armed Forces personnel and the civilian population of the Czech Republic. No data on STI epidemiology in the Czech Republic military service are available since its foundation. We did observe higher HPV prevalence in military recruits compared with active female soldiers and civilian control group. No statistically significant difference was observed for C. trachomatis and N. gonorrhoeae between the military and civilian groups. Military recruits seem to be at higher risk of acquiring STI due to the more prevalent STI risk factors. This observation should be researched in an extended study to clarify the potential reproductive health risks under circumstances of subsequent military service. Preventive measures such as HPV vaccination or STI testing at the time of admission could be considered to actively reduce the risks of STI burden in the military.

Ethics statements

Patient consent for publication.

Not applicable.

Ethics approval

This study involves human participants and was approved by the Ethics Committee of the Military University Hospital Prague, reference number of the decision 108/13-84/2029. Participants gave informed consent to participate in the study before taking part.

• zur Hausen H
• Bzhalava D ,
• Franceschi S , et al
• de Sanjosé S , et al
• Weström L ,
• Joesoef R ,
• Reynolds G , et al
• McCormack WM
• ↵ Gonorrhoea-annual Epidemiological report for 2019 . 2023 . Available : https://www.ecdc.europa.eu/en/publications-data/gonorrhoea-annual-epidemiological-report-2019 [Accessed 18 Jun 2023 ].
• Mattocks KM ,
• Gaydos JC ,
• Co E , et al
• Jordan NN ,
• Hansen SL ,
• Kwon PO , et al
• Macalino GE ,
• Nsouli-Maktabi H , et al
• Gottwald C ,
• Schwarz NG ,
• Frickmann H
• Lesiak-Markowicz I ,
• Tscherwizek C ,
• Pöppl W , et al
• Kreisel KM ,
• Spicknall IH ,
• Gargano JW , et al
• Tachezy R ,
• Smahelova J ,
• Kaspirkova J , et al
• ↵ Cases of selected infectious diseases in the Czech Republic, January-December 2022 , Available : https://szu.cz/wp-content/uploads/2023/03/tabulka_leden-prosinec_2022.pdf [Accessed 17 Oct 2023 ].
• Gassowski M ,
• Poethko-Müller C ,
• Schlaud M , et al
• Křepelka P ,
• Urbánková I , et al
• Stokłosa M ,
• Stokłosa I ,
• Więckiewicz G , et al
• Beardsley L , et al
• Chackerian B ,
• van den Brule AJ , et al
• Devarakonda S ,
• Liu L , et al
• Shafer M-AB ,
• Pollack LM , et al
• Gaydos CA ,
• Howell MR ,
• Pare B , et al

Contributors LK: guarantor, study design, methodology, data curation, investigation, formal analysis and writing original draft and editing. JS: study design, methodology and writing—review and editing. PS: data curation and writing—review and editing. JS: investigation and writing—review and editing. RT: investigation and writing—review and editing. IK: data curation and writing—review and editing. DN: investigation and writing—review and editing.

Funding This study was funded by the Project National Institute of Virology and Bacteriology (Programme EXCELES, ID Project No. LX22NPO5103) - Funded by the European Union - Next Generation EU, Ministerstvo Školství, Mládeže a Tělovýchovy (SV/FVZ202006), Ministerstvo Obrany České Republiky (MO1012).

Competing interests None declared.

Provenance and peer review Not commissioned; externally peer reviewed.

Read the full text or download the PDF:

• About / Contact
• Privacy Policy
• Alphabetical List of Companies
• Business Analysis Topics

BMW Five Forces Analysis & Recommendations (Porter’s Model)

The external factors evaluated in this Five Forces analysis of BMW, using Porter’s model, demonstrate a competitive industry. BMW and other automakers and motorcycle manufacturers aggressively innovate to compete in the international market. This Five Forces analysis case accounts for the bargaining power of customers, the bargaining power of suppliers, the threat of substitution, the threat of new entry, and the degree of competitive rivalry in the automotive and motorcycle industry environment. The fulfillment of business goals based on BMW’s mission statement and vision statement depends on the effects of the factors in this Five Forces analysis and on the company’s response to competitive challenges. Strategies must improve business performance despite the competitive pressure illustrated in this Five Forces analysis of BMW.

BMW (Bayerische Motoren Werke/Bavarian Motor Works) has business competencies and competitive advantages for mitigating and managing the effects of the external factors outlined in this Five Forces analysis. The external factors evaluated in this Five Forces analysis relate to issues that BMW needs to include in strategic decision-making processes for growth in the global markets for automobiles and motorcycles.

Summary: Five Forces Analysis of BMW

The external factors relevant to BMW in this Five Forces analysis case indicate a competitive industry where firms and suppliers have considerable leverage. The other three of the five forces are significant but have limited impact on the automotive and motorcycle business. The following are the intensities of the Five Forces affecting BMW:

• Bargaining power of customers: Weak
• Bargaining power of suppliers: Moderate to Strong
• Threat of substitutes: Weak to Moderate
• Threat of new entrants: Weak
• Competitive rivalry: Strong

Recommendations. The strong force of competition determined in this Five Forces analysis directs attention to the importance of the core competencies and competitive advantages shown in the SWOT analysis of BMW in supporting the company’s competitiveness. Managing the bargaining power of suppliers may require other approaches, such as a supply-chain diversification strategy for the automotive company. BMW’s competitive strategy and growth strategies need to align with the effects of the external factors considered in this Five Forces analysis. However, competitive rivalry and supplier power in the automotive and motorcycle industries must receive strategic prioritization. The following are recommendations based on this Five Forces analysis of BMW:

• Further investment in technological innovation for cars and motorcycles, to address competitors’ high rates of innovation.
• A more innovative marketing strategy to counteract customers’ switching and reduce the impact of competition on BMW.
• Strategic improvements to diversify the supply chain for managing the bargaining power of BMW’s suppliers.
• Strategic improvements for vertical integration to manage supplier power in BMW’s automotive and motorcycle manufacturing operations.

Bargaining Power of Customers (Weak)

Buyers’ leverage and bargaining power over the automaker are evaluated in this component of the Five Forces analysis. The following factors influence the bargaining power of BMW’s customers:

• Low cost of switching between BMW and competitors
• Moderate substitute availability
• Small size of individual customers

Customers face low switching costs representing the ease of buying an automobile or motorcycle other than what BMW offers. The moderate availability of substitute transportation options, such as mass transit, has a moderate contribution to customers’ bargaining power in this Five Forces analysis case. Also, target customers’ small size relative to BMW’s business operations limits this bargaining power. These external factors lead to the weak bargaining power of customers in this Five Forces analysis of the automaker. The social, economic, and technological trends enumerated in the PESTLE/PESTEL analysis of BMW determine customers’ tendency to switch to other manufacturers or to use substitutes.

Bargaining Power of Suppliers (Moderate to Strong)

Suppliers’ bargaining power and influence over the automotive company are considered in this component of the Five Forces analysis. The following factors shape the bargaining power of BMW’s suppliers:

• Low presence of substitute inputs
• Moderate to high supplier specialization
• Moderate to high cost of switching between suppliers

The low presence or availability of substitute inputs strengthens supplier power in this Five Forces analysis of BMW. For example, the company cannot readily substitute a car component with a different material or input. On the other hand, BMW relies on suppliers that specialize in car or motorcycle components. In Porter’s Five Forces analysis model, this external factor strengthens the bargaining power of suppliers. This factor also relates to the moderate to high cost of switching between suppliers, which further strengthens supplier power over BMW. This component of the Five Forces analysis determines the moderate to strong bargaining power of suppliers in the automotive and motorcycle industries. Practices for efficiency, effectiveness, and productivity in BMW’s operations management help mitigate supplier power and leverage.

Threat of Substitutes (Weak to Moderate)

The negative effect of substitution is evaluated in this component of the Five Forces analysis of the automotive and motorcycle business. Substitutes’ threat to BMW are based on the following external factors:

• Low to moderate substitute performance
• Customers’ low to moderate propensity to substitute

Mass transit, bicycles, and other alternatives to cars and motorcycles are only moderately available substitutes that compete with BMW’s products. Many suburban and rural areas lack public transit. In this Five Forces analysis of BMW, moderate substitute availability has a moderate contribution to the intensity of the threat of substitution. Also, many substitutes’ performance is low or moderate compared to driving a car. For example, mass transit options may come with inconvenient schedules, while bicycles do not offer protection from the elements. This external factor has a limiting effect on the substitution threat to BMW in this Five Forces analysis. These factors relate to the moderate propensity of customers to use substitutes instead of the company’s cars or motorcycles. The combination of these external factors leads to the weak to moderate threat of substitution for BMW vehicles in this Five Forces analysis case.

Threat of New Entrants (Weak)

The competitive impact of new entry on the car and motorcycle company is considered in this component of the Five Forces analysis. New entrants’ threat to BMW are based on the following factors:

• High cost of entry
• High cost of vehicle brand development
• Low cost of switching between BMW and other vehicle manufacturers

The high cost of establishing a vehicle manufacturing business and the high cost of brand development are barriers to entry that limit the threat of new entrants in this Five Forces analysis of BMW. On the other hand, the low switching costs when customers buy from a different manufacturer can strengthen new entrants’ competitiveness. These external factors lead to the weak threat of new entry, which has a limited influence on competitive pressure and the competition considered in this Five Forces analysis of BMW.

Competitive Rivalry (Strong)

The force of competition and its impact are evaluated in this component of the Five Forces analysis of the automotive and motorcycle business. The following factors influence the degree of competitive rivalry with BMW:

• Low to moderate differentiation among manufacturers
• High rates of innovation
• Low cost of switching between vehicle manufacturers

BMW competes with automotive firms, such as Ford , General Motors , Tesla , and Toyota , as well as motorcycle companies, like Harley-Davidson . These competitors’ low to moderate differentiation and their innovation capabilities add to the degree of competitive rivalry in this Five Forces analysis case of BMW’s automotive and motorcycle business. On the other hand, buyers’ low switching cost when shifting from BMW to other brands or manufacturers intensifies competition. In Porter’s Five Forces analysis model, these external factors lead to the strong force of competitive rivalry in the automotive and motorcycle industries. The strategies and tactics included in BMW’s marketing mix (4P) help maintain profitable relations with target buyers and mitigate the effects of the competitive rivalry evaluated in this Five Forces analysis.

• BMW Group Report .
• BMW Group Strategy .
• Fedotov, P. (2022). Critical Analysis of the Electric Vehicle Industry: Five forces and strategic action fields. Exchanges: The Interdisciplinary Research Journal, 10 (1), 43-56.
• Forsythe, C. R., Gillingham, K. T., Michalek, J. J., & Whitefoot, K. S. (2023). Technology advancement is driving electric vehicle adoption. Proceedings of the National Academy of Sciences, 120 (23), e2219396120.
• International Organization of Motor Vehicle Manufacturers – Sales Statistics .
• Muzzio, M. (2023). Imagined futures of the automotive industry stemming from uncertainty. Joule, 7 (6), 1099-1100.
• Copyright by Panmore Institute - All rights reserved.
• This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s.
• Educators, Researchers, and Students: You are permitted to quote or paraphrase parts of this article (not the entire article) for educational or research purposes, as long as the article is properly cited and referenced together with its URL/link.