Porters Five Forces is a model used for analyzing the competitive environment of an industry. This Porters Five Forces Example is for the PC Industry (personal computer) in 2008. The five forces in Porter's model are:
- Industry Competition/Rivalry – most notably identified by the level of price competition and product introductions.
- Suppliers – exert power by raising prices or making switching costs high. Suppliers are most powerful when there are only a few key players.
- Buyers – exert power by forcing prices down. Buyers are most powerful when they are the primary customer for a company or when the product they are purchasing is a commodity.
- Potential Entrants – the threat of potential entrants is highest when there are no significant barriers to entry into the industry. High profits attract new entrants to the industry.
- Substitutes – The threat of substitutes is a concern when a new product or service might meet the same need better, faster or cheaper.
The first slide in this Porters Five Forces example highlights the strength of each force in the PC Industry by the color of the box. Red represents a strong force, orange a medium force, and green a weak force. The comments on the slide describe the analysis in more detail.
The second slide illustrates recommended strategies for a firm competing in the 2008 PC industry with the given competitive environment. Strategies are indicated in blue, and expected benefits of the strategy are indicated in the lighter blue color. Further analysis is described in the comments of the slide.
Porters Five Forces analysis was initially introduced by Michael Porter of Harvard Business School in 1979. It can be used to assess the attractiveness of an industry, as well as identify and develop business strategies for existing players. This analysis in this example is intended for an existing player in the 2008 PC Industry.