FIVE FORCES MODEL

QUESTIONS TO ASSESS EACH FORCE

S. No. BTE + +/- - Remarks

1 Do large firms have cost or
performance advantage?
2 Are there any proprietary advantages
in the industry?
3 Are there any established brand
identities in the industry
4 Do the customers incur any
significant cost in switching
5 Is a lot of capital needed to enter the
industry?
6 Dos the new entrant face any
difficulty in accessing distribution
channels?
7 Does experience in the industry help
an incumbent to continuously lower
cost?
8 Does the new entrant face any
difficulty and costs in obtaining any
resource required to participate in the
industry?
9 Do firms any proprietary technology?
10 Are the incumbents likely to react
strongly to the new entrant?
11 Are there licenses and qualifications
difficult to obtain?
‘+’ is favourable & ‘-‘is unfavourable, ‘+/-‘is neutral.

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 FIVE FORCES MODEL
QUESTIONS TO ASSESS EACH FORCE

Sl. No. Bargaining Power of Buyers + +/- - Remarks

1. Are there large numbers of buyers than
the firms in the industry
2. Are there large numbers of customers
with small purchases?
3. Does the customer face any switching
costs?
4. Does the buyer need a lot of important
information?
5. Is the buyer aware of the need for
additional information?
6. Can the buyer credibly integrate
backward and take your function in-
house?
7. Are your customers highly sensitive to
price?
8. Are the products commodities?
‘+’ is favourable & ‘-‘is unfavourable, ‘+/-‘is neutral.

Sl. No. Power of substitutes + +/- - Remarks

1. Substitutes have performance
limitations that do not offset their
lower prices?
2. The customer is unlikely to switch
3. The customer shall incur costs in
switching to substitutes
4. The customer has really no
substitute
‘+’ is favourable & ‘-‘is unfavourable, ‘+/-‘is neutral.

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 FIVE FORCES MODEL
QUESTIONS TO ASSESS EACH FORCE

Sl. No. Bargaining Power of Suppliers + +/- - Remarks

1. Industry inputs from suppliers are
commodities
2. Firms in the industry face no
switching costs
3. There is no threat of credible forward
integration from the suppliers in the
industry
4. Incumbents can substitute inputs
quickly
5. The number of suppliers for exceeds
the number of incumbents
6. Business of incumbents is very
important to the suppliers
7. Costs of purchase by incumbents are
not significant for the overall cost
‘+’ is favourable & ‘-‘is unfavourable, ‘+/-‘is neutral.

Sl. No. Rivalry + +/- - Remarks

1. Industry growth is good
2. Not a cyclical industry with
significant seasonality of demand
3. Sunk costs or fixed costs are not high
relatively speaking
4. It is relatively easy to get out of the
industry as there are no long term
contracts and commitments
5. Industry is not fragmented
6. The product is not a commodity and
has many distinguishing features
7. Customers would incur significant
switching costs in moving to
competitors within the industry
8. There is a price leader to provide
stability in industry
9. Technological obsolesce is rare
‘+’ is favourable & ‘-‘is unfavourable, ‘+/-‘is neutral.

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 FIVE FORCES MODEL
QUESTIONS TO ASSESS EACH FORCE

Overall Industry Attractiveness

Sl. No. Force + +/- - Remarks

1. BTE 8 3 1 Barriers to entry are high.

Significant costs would be
incurred by new entrants
as EOS and Experience
curves are deep and
significant
2. Bargaining Power of Buyers 5 1 2 Bargaining power of
buyers is muted. Buyers
would brand sensitive and
highly fragmented
3. Substitutes 3 1 0 Substitutes suffer cost
disadvantage and are
weak
4. Bargaining Power of Suppliers 4 1 2 Weak suppliers selling
commodities
5. Intensity of Rivalry 5 2 1 Avoided competition with
concentrated industry

Conclusion: Highly Attractive Industry

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