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Five Forces Analysis

This document provides a template for conducting a five forces analysis to evaluate competitive rivalry and profitability within an industry. It includes questions addressing five key factors: 1) rivalry among existing competitors, 2) threat of new entry, 3) pressure from substitute products and support from complements, 4) bargaining power of suppliers, and 5) bargaining power of buyers. The template characterizes each factor based on current and potential future conditions and evaluates how each impacts the typical firm's profitability within the industry.

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256 views

Five Forces Analysis

This document provides a template for conducting a five forces analysis to evaluate competitive rivalry and profitability within an industry. It includes questions addressing five key factors: 1) rivalry among existing competitors, 2) threat of new entry, 3) pressure from substitute products and support from complements, 4) bargaining power of suppliers, and 5) bargaining power of buyers. The template characterizes each factor based on current and potential future conditions and evaluates how each impacts the typical firm's profitability within the industry.

Uploaded by

wonderland123
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Five Forces Analysis Template

1) Factors Affecting Rivalry Among Existing Competitors


To what extent does pricing rivalry or non-price competition (e.g., advertising) erode the profitability of a typical firm in this industry?

Characterization (Current)
1. Degree of seller concentration?

Future

2. Rate of industry growth?

3. Significant cost differences among firms?

4. Excess capacity?

5. Cost structure of firms: sensitivity of costs to capacity utilization? 6. Degree of product differentiation among sellers? Brand loyalty to existing sellers? Cross-price elasticities of demand among competitors in industry? 7. Buyers costs of switching from one competitor to another? 8. Are prices and terms of sales transactions observable?

9. Can firms adjust prices quickly?

10. Large and/or infrequent sales orders? 11. Use of facilitating practices (price leadership, advance announcement of price changes)? 12. History of cooperative pricing?

13. Strength of exit barriers?

Five Forces Analysis Template


2) Factors Affecting the Threat of Entry
To what extend does the threat or incidence of entry work to erode the profitability of a typical firm in this industry?

Characterization (Current)
14. Significant economies of scale?

Future

15. Importance of reputation or established brand loyalties in purchase decision?

16. Entrants access to distribution channels?

17. Entrants access to raw materials?

18. Entrants access to technology/know-how?

19. Entrants access to favorable locations?

20. Experience-based advantages of incumbents? 21. Network externalities: demand-side advantages to incumbents from large installed base? 22. Government protection of incumbents? 23. Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for toughness?

Five Forces Analysis Template


3) Factors Affecting or Reflecting Pressure from Substitute Products and Support from Complements
To what extend does competition from substitute products outside the industry erode the profitability of a typical firm in the industry?

Characterization (Current)

Future

24. Availability of close substitutes?

25. Price-value characteristics of substitutes?

26. Price elasticity of industry demand?

27. Availability of close complements

28. Price-value characteristics of complements?

Five Forces Analysis Template


4) Factors Affecting or Reflecting Power of Input Suppliers
To what extend do individual suppliers have the ability to negotiate high input prices with typical firms in this industry? To what extend do input prices deviate from those that would prevail in a perfectly competitive input market in which input suppliers act as price takers?

Characterization (Current)
29. Is supplier industry more concentrated than industry it sells to? 30. Do firms in industry purchase relatively small volumes relative to other customers of supplier? Is typical firms purchase volume small relative to sales of typical supplier? 31. Few substitutes for suppliers input?

Future

32. Do firms in industry make relationship-specific investments to support transactions with specific suppliers? 33. Do suppliers pose credible threat of forward integration into the product market? 34. Are suppliers able to price discriminate among prospective customers according to ability/willingness to pay for input?

Five Forces Analysis Template


5) Factors Affecting or Reflecting Power of Buyers
To what extend do individual buyers have the ability to negotiate low purchase prices with typical firms in this industry? To what extent to purchase prices differ from those that would prevail in a market with a large number of fragmented buyers in which buyers act as price takers?

Characterization (Current)
35. Is buyers industry more concentrated than industry it purchases from?

Future

36. Do buyers purchase in large volumes? Does a buyers purchase volume represent large fraction of typical sellers sales revenue?

37. Can buyers find substitutes for industrys product?

38. Do firms in industry make relationship-specific investments to support transactions with specific buyers?

39. Is price elasticity of demand of buyers product high or low?

40. Do buyers pose credible threat of backward integration?

41. Does product represent significant fraction of cost in buyers business? 42. Are prices in the market negotiated between buyers and sellers on each individual transaction or do sellers post a take-it-or-leave it price that applies to all transactions?

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