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Porter’s Five Forces Analysis of New Industry

1. Rivalry among competitors

  • How many competitors are there in the industry?
  • What is each competitor’s position? How much of the market share has each one captured?
  • Do companies compete intensely in this industry? If so, do they engage in rivalry and lower prices to gain market share?
  • Do companies compete to provide additional services or constant innovation?

2.  Threats of New Entrants to the Market

 

  • What barriers are there to entering the market?
  • Are there many regulations or legal barriers?
  • Are there high costs associated with gaining the expertise necessary to produce goods or provide services for the market?
  • How many other companies are just as prepared or better prepared than yours to enter this industry?  

 

3. Bargaining Power of Suppliers

 

  • Which companies provide the raw materials for your product?
  • Are there many suppliers, or only a few?
  • Does rivalry between the suppliers drive down the price of some of the raw materials?
  • Is a virtual monopoly on some of the raw materials by a single supplier likely to drive up the price of raw materials?
  • Overall, how will the bargaining power of suppliers affect the cost and ease of obtaining the materials necessary to enter the new industry?

 

4. Threat of Substitute Products

 

  • Are other products emerging in this industry that might compete with existing products?
  • What are these possible competing products?
  • Are these possible competing products cheaper to produce than the industry’s current products?
  • Are these possible competing products better in other ways?
  • Could these possible competing products wedge your company out of the market?

 

5. Bargaining Power of Buyers

 

  • How many different companies or consumer groups buy the products sold in this new industry?
  • If there are only a few customers, would they be able to push to lower the price of the products?
  • If there are many, are there any organizations that enable the customers to band together and jointly apply pressure to reduce costs of your products?