The Structre of Industry Teaching Note at BizProf

As described below, the impact of the five forces on profitability from Porter's model (prior page) can be summarized, as follows:

COMPETITIVE FORCE	WILL LOWER PROFITABILITY	WILL RAISE PROFITABILITY
Ease of Entry	Easy to Enter if there is:	Difficult to Enter if there is:
	Common technology	Brand switching difficult
	Access to distribution channels	Proprietary know-how
	Restricted distribution channels	High scale threshold
	Little brand franchise	High scale threshold
Ease of Exit	Difficult to Exit if there is:	Easy to Exit if there is:
	Specialized assets (High exit costs)	Salable assets
	Interrelated businesses	Independent business
Power of Suppliers	Suppliers Powerful if:	Suppliers Weak if:
	Credible forward integration threat by suppliers	Many competitive suppliers
	Suppliers concentrated	Purchase commodity products
	Significant cost to switch suppliers	Credible backward integration threat by purchasers
	Customers Powerful	Concentrated purchasers or Customers Weak
Power of Buyers	Buyers Powerful if:	Buyers Weak if:
	Buyers concentrated	Buyers threaten forward integration
	Buyers purchase significant proportion of output	Significant buyer switching costs
	Buyers possess credible backward integration threat (threaten to buy producing firm)	Buyers fragmented (many, different)
		Producers supply critical portions of buyers' input
Threat of Substitutes	Substitution Easy if:	Substitution Difficult if:
	Low user switching costs	High user switching costs
	Substitute producers profitable and aggressive	Substitute producers unprofitable & passive
Rivalry	Many Competitors if:	Few Competitors if:
	Competitors equal size	Diverse competitor sizes
	Slow demand growth	Industry leader
	Excess capacity	Low fixed costs
	Diversity of approach and historical background	Commonality of approach and historical background
	Commodity products	Differentiated products
	High fixed costs	Fast demand growth