Michael Porter’s 5-Force Analysis
October 5, 2008
Business 311 Section 4 Team 8
By: Joshua Horita, Supakorn Utamavibul, Travis Miwa,
Keith Kaneshiro, Candice Umeda
Porter’s 5-Force Analysis
Michael Porter’s 5-forces can be used to analyze an industry and help shape and create a “competitive strategy” (Porter, 6). Understanding each of the five forces and how they interact with one another provides a clear picture of the degree of competition being faced within an industry, and therefore its relative attractiveness. The understanding cannot provide an advantage; it is what you do with the understanding. Without the understanding, a strategy can be at risk of being unrealistic. Michael Porter’s 5-force Analysis is a tool for the structural analysis of industries. There are 5 forces that always shape the competitive structure of an industry: Supplier Power, Barriers to Entry, The Threat of Substitutes, Buyer Power, and Industry Rivalry.
I. SUPPLIER POWER
Supplier power is the ability of a supplier to control the cost and supply of the inputs in the market. The supplier power of an industry can be altered in many ways:
1) Differentiation of Inputs – If a company needs various inputs from different suppliers, then those suppliers have a high power.
2) Switching Costs for Transferring to Other Suppliers - Supplier power is high if the cost to switch over to a new system is high.
3) Availability of Substitutes – If the raw material that’s needed for manufacturing can be replaced with alternatives, the supplier power is low.
4) Supplier Concentration – Th ...