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Michael Porter is giving a five forces model of

strategies is one of the most effective and
enduring conceptual frameworks used to assess
the nature of the competitive environment and
to describe an industry͛s structure.
FIVE FORCES MODELS OF STRATEGIC
POTENTIAL OTHER
ENTRANT STAKE-
HOLDERS

Threat of New Entrant

INDUSTRY
Bargaining COMPETITORS
SUPPLIERS
power of REVALRY AMONG
suppliers EXISTING FIRMS Bargaining
power of
Buyers BUYERS

Threat of Substitutes products or services

SUBSTITUTES
PRODUCTS
› MBER OF COMPETITORS
The number of competitors and industry
growth are the most influential parts of the
Existing firms. Industries having high fixed cost
are likely to face price wars , when the market
stagnates or overcapacity becomes a regular
occurrence. The firms are facing the intensifies
competition. For Ege-
Steel and Cement Industries.
THREAT OF ›EW E›TRA›T
During the introduction and growth stages, the
entry of a new firms can help in expanding the
market. The new entrant company may also
increase the competition intensity in mature
market situations. The mature market
situations are characterized by the entry
barriers, high capital intensity, proprietary
technology, etc.
BARGAI›I›G POWER OF B
ERS
This is refers to the ability of the industries
customers to force down prices, bargain for
higher quality or more services and competitors
against each other. The buyer or a buyer group is
powerful when-
* A Buyer purchase a large portion of the seller͛s
products or services.
* Purchased product can be easily substituted
without effecting the final product, for eg-
Filament lamp.
BARGAI›I›G POWER OF S PPLIERS

The bargaining power of suppliers refers to a

situation where suppliers can force buyers to
pay higher prices and effect their profitability.
This would happen when-
* The suppliers enjoys monopoly.
* The substitutes are not available. For eg-
Electricity.
RELATIVE POWER OF OTHER
STAKEHOLDERS
These groups may be the Government, local
communities, industries and trade
associations, shareholders, special interest
groups, and creditors but not included with
suppliers. Important of stakeholders varies
according to industries. For some industries
/projects, environmental groups may be
important. For eg.
Power projects of the company.
Threat of substitutes products
Substitutes limits the potential returns on the
investments by placing a ceiling on the prices,
which firms in the industry can profitability
charge. As long as switching costs are low,
substitution can have strong effect. For eg.
Tea can be considered as a substitute for
coffee, mineral water like Bisleri , Aquafina.