BUSI 690 CH3 hwk
1
The Five Forces Model of Competition
The character and complexities of competitive forces are rarely the same from one industry to
another and must be thoroughly understood to answer such questions as: “Where are we now?”
Michael Porter’s Five Forces Competitive Model is the most widely used tool in business today
in determining the competitive intensity and therefore attractiveness of a particular industry.
This model, as depicted in Figure 3.3, holds that competitive forces affecting industry
attractiveness go beyond rivalry among competing sellers and include pressures stemming from
four coexisting sources. The five competitive forces affecting industry attractiveness are listed
below:
1. 1. Competitive pressures stemming from buyer bargaining power.
, 2. 2. Competitive pressures coming from companies in other industries to win buyers over
to substitute products.
3. 3. Competitive pressures stemming from supplier bargaining power.
4. 4. Competitive pressures associated with the threat of new entrants into the market.
5. 5. Competitive pressures associated with rivalry among competing sellers to attract
customers. This is typically the strongest of the five competitive forces.
Instructions: Based on the information provided in the Overview, match the competitive pressure
to its source of competition.
1. Low switching costs; Some loyalty; Low bargaining power; Price sensitivity
2. Medium switching costs
3. Mature stage business cycle; High fixed costs; Brand identities and amenities differ; Low
switching costs
4. Limited number of manufacturers; Standardized products; High capital requirements;
Long-term contracts; Limited differentiation; High switching costs; Low bargaining
power
5. High capital needs; Extremely low switching costs; No proprietary products or services;
Little or no profit the first few years; Likelihood of retaliation strong; Consumer
preference for well-known brands
Match each of the options above to the items below.
Suppliers4
Buyers111CorrectCorrect
Substitutes 22CorrectCorrect
1
The Five Forces Model of Competition
The character and complexities of competitive forces are rarely the same from one industry to
another and must be thoroughly understood to answer such questions as: “Where are we now?”
Michael Porter’s Five Forces Competitive Model is the most widely used tool in business today
in determining the competitive intensity and therefore attractiveness of a particular industry.
This model, as depicted in Figure 3.3, holds that competitive forces affecting industry
attractiveness go beyond rivalry among competing sellers and include pressures stemming from
four coexisting sources. The five competitive forces affecting industry attractiveness are listed
below:
1. 1. Competitive pressures stemming from buyer bargaining power.
, 2. 2. Competitive pressures coming from companies in other industries to win buyers over
to substitute products.
3. 3. Competitive pressures stemming from supplier bargaining power.
4. 4. Competitive pressures associated with the threat of new entrants into the market.
5. 5. Competitive pressures associated with rivalry among competing sellers to attract
customers. This is typically the strongest of the five competitive forces.
Instructions: Based on the information provided in the Overview, match the competitive pressure
to its source of competition.
1. Low switching costs; Some loyalty; Low bargaining power; Price sensitivity
2. Medium switching costs
3. Mature stage business cycle; High fixed costs; Brand identities and amenities differ; Low
switching costs
4. Limited number of manufacturers; Standardized products; High capital requirements;
Long-term contracts; Limited differentiation; High switching costs; Low bargaining
power
5. High capital needs; Extremely low switching costs; No proprietary products or services;
Little or no profit the first few years; Likelihood of retaliation strong; Consumer
preference for well-known brands
Match each of the options above to the items below.
Suppliers4
Buyers111CorrectCorrect
Substitutes 22CorrectCorrect
