Porter's Five Forces

Learning Objective 4:

Understand Porter’s Five Forces

• How these determinants affect the degree of each force

|Porter’s Five Forces |Examples |Degree of each force |Profitability of |

| | |(Low/High) |the industry |

| | | |(Low/High) |

|Determinants affecting barriers to entry (Force 1): | |threat of new entrants/barriers to entry | |

|Proprietary product differences (e.g., patents) |Products in the industry are protected by patents |Low threat of new entrants/high barriers to|High |

| | |entry | |

|Economies of scale (i.e., low production cost) |Low production costs in the industry |Low threat of new entrants/high barriers to|High |

| | |entry | |

|Buyer’s switching costs |The switching cost to buyers of a product are high |Low threat of new entrants/high barriers to|High...