Porter's Five Forces Analysis Software

Industry Rivalry

There are many very successful software companies; many of the top companies have a specific type of software that is their main focus but generally have a wide array of offerings. One of the competitive advantages of the Software Industry is the high cost of switching products. The cost of switching to competing software is high in terms of time and dollars, the cost of the initial software, the learning curve that comes with implementing and utilizing the new software as well as reworking the other software and hardware on a computer to work in a complimentary way with the new software. Many customers remain loyal to an individual software producer due to familiarity and ease of use amongst products. Because there are such high costs of switching but also very high quality competing products this industry has a medium degree of competitive rivalry.

Bargaining Power of Buyers

Software purchasing is done by businesses, individuals and governmental entities. A large portion of the revenue for the industry leaders come from licensing their software to business and governmental entities therefore the bargaining power of buyers in this industry is high due to the dependence of the business on the buyer.

Bargaining Power of Suppliers

Products provided by suppliers in the software industry are negligible and include things like discs and packaging. The products supplied are neither rare nor unique and could be supplied by any number of major suppliers. There would be very limited costs involved in switching suppliers therefore the bargaining power of suppliers in the software industry is probably low.

Threat of Substitution

There are many different products available that would meet consumer’s needs in the software industry, however each product is distinguishable. Substitution is possible but unlikely due to the customization and high cost of switching. There is also interdependence between many different software programs...