Industry and Competitor Analysis Form

III. TheFiveCompetitiveForcesThat

DetermineIndustryProfitability

 Thefivecompetitiveforcesmodelisaframeworkforunderstandingthe

structureofanindustryandwasdevelopedbyMichaelPorter.

 Theframeworkiscomprisedoftheforcesthatdetermineindustry

profitability.

 Theseforces–thethreatofsubstitutes,theentryofnewcompetitors,

rivalryamongexistingfirms,thebargainingpowerofsuppliers,andthe

bargainingpowerofbuyers–determinetheaveragerateofreturnforthe

firmsinanindustry.

 Each

ofPorter’sfiveforceshasanimpactontheaveragerateofreturnfor

Universityof Zurich

ISU– InstituteforStrategyandBusinessEconomics

UlrichKaiser

AprimerinEntrepreneurship

Springsemester2008

thefirmsinanindustrybyapplyingpressureonindustryprofitability.

Well‐managedcompaniestrytopositiontheirfirmsinawaythatavoidsor

diminishestheseforcesinanattempttobeattheaveragerateofreturnfor

theindustry.

Universityof Zurich

ISU– InstituteforStrategyandBusinessEconomics

UlrichKaiser

AprimerinEntrepreneurship

Springsemester2008

Source:http://upload.wikimedia.org/wikipedia/commons/6/66/Porters_five_forces.PNG

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