Page 51 - E2 Integrated Workbook STUDENT 2018

The global business environment

Industry level analysis

3.1 Porter’s five forces model

THREAT OF
NEW
ENTRANTS

POWER OF COMPETITIVE POWER OF
BUYERS RIVALRY SUPPLIERS

THREAT OF
SUBSTITUTES

 Competitive rivalry – will depend on the number and strength of
competitors, the level of fixed costs and the rate of growth in the industry

 Threat of new entrants – new entrants will bring extra capacity and
intensify competition

 Threat of substitutes – more substitutes makes it easier for buyers to
switch to other products

 Power of buyers – powerful buyers can force price cuts/quality
improvements

 Power of suppliers – can charge higher prices, forcing down profit margins

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