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FIVE COMPETITIVE FORCES OF INDUSTRY
Michael Porter has postulated that the intensity of competition in an industry is determined by its underlying economic structure1. And he further contends as we saw above, that the industry structure is shaped by five basic competitive forces: the threat of new entrances into the industry, the bargaining power of suppliers to the industry, the threat of substitute products or services, the bargaining power of customers or buyers, and the Rivalry among Existing Firms. The figure shows these competitive forces.


The threat of substitute products

The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand).
 buyer propensity to substitute
 relative price performance of substitutes
 buyer switching costs
 perceived level of product differentiation

The threat of the entry of new competitors

Profitable markets that......

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Approximate Word Count: 1309
Approximate Pages: 6 (250 words per double-spaced page)

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