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Five Forces Report Overview

The Five Forces Report is broken down into five sections. Each section presents the following
information.
1. An explanation of the force and its strength within the industry. Forces can be very weak, weak,
moderate or powerful depending on how each of the 31 attributes are rated.
2. The mean rating and standard deviation for each attribute of the Five Forces model.
• Individual Assessment: The mean is the rating the person gave the attribute and the
standard deviation will be zero.
• Team Assessment: The mean is the average rating the team gave the attribute and the
standard deviation shows the extent to which the team rated the attribute the same. The
higher the standard deviation the greater the difference in how team members rated the item.
You may want to discuss those items with a high standard deviation.
• The attribute that describe the industry is bolded for each item.
3. Specific strategies and tactics to improve your competitive position in the industry. Strategies and
tactics are ONLY provided for those items were the force is moderate or powerful in the industry.

A sample report is presented below.

Aggregate response: Porter's Five Forces Industry Analysis

1. CUSTOMERS

Buyers/customers are a moderate force in the industry. Powerful buyers drive down profitability because they bargain for
lower prices, demand better product features for the same price, and play one competitor against another. Weak buyers are
not likely to be as price-sensitive or to impose demands on companies in the industry. Here are some suggested strategies
and tactics you might consider to reduce the power of customers, whether they are individuals or organizations.
Standard
Mean
Deviation
Companies in the industry sell too Companies in the industry sell to a few
2.67 1.25
many small customers. large customers/buyers.
Standard
Mean
Deviation
It is costly for customers/buyers to It is easy for customers/buyers to
switch from one source of supply to switch from one source of supply to 4.67 0.47
another. another.
Mean Standard Deviation
The products/services offered by The products/services offered by
companies in the industry are very companies in the industry are
different from one another in features, essentially interchangeable and 5 0
design, pricing, and so forth. No two indistinguishable. The
products or services are the same. product/service is a commodity.
Standard
Mean
Deviation
Customers/buyers generally purchase Customers/buyers generally purchase
the product/service from a single the product/service from multiple 3.33 1.25
source. sources.
Standard
Mean
Deviation
The cost of the product/service
The cost of the product/service
represents a relatively small
represents a relatively large percentage 2.33 1.25
percentage of the buyer’s/customer’s
of the buyer’s/customer’s total cost.
total cost.
Standard
Mean
Deviation
Customers/buyers of the
Customers/buyers of the product/service
product/service have good margins 4 1.41
have tight margins and low profitability.
and are quite profitable.
Standard
Mean
Deviation
Customers are not likely to backward- Customers could if desired backward-
integrate (i.e., acquire a company in integrate (i.e., acquire a company in the 2.33 1.89
the industry being analyzed). industry being analyzed).
Standard
Mean
Deviation
Companies in the industry could
Companies in the industry are not likely to
forward-integrate if desired (i.e.,
forward-integrate (i.e., acquire one or more 3.33 1.89
acquire one or more of their
of their customers/buyers).
customers/buyers).
Standard
Mean
Deviation
The product/service of the industry is The product/service of the industry is of
3.33 1.25
very important to the buyer/customer. little importance to the buyer/customer.
Here are some suggested strategies and tactics you might consider:

• Find new ways to differentiate your product/service that have value to the customer. Even if your product is a
commodity, there are ways to differentiate it in terms of the services that surround it. Differentiation can occur from
the very first time customers becomes aware of your product to the time when they must dispose of it.

2. COMPETITORS

Rivalry among competitors in the industry is powerful. Competitors can drive down industry profitability by cutting prices or
offering more product features for the same price. When rivalry is most intense, competitors often compete head-to-head on
price. When competition is disciplined and constrained by industry norms, rivalry is weak. Here are some suggested strategies
and tactics you might consider to lower the intensity of rivalry with competitors.
Standard
Mean
Deviation
It is costly for customers/buyers to switch It is easy for customers/buyers to switch from
4.67 0.47
from one source of supply to another. one source of supply to another.
Standard
Mean
Deviation
The products/services offered by companies
The products/services offered by
in the industry are very different from one
companies in the industry are essentially
another in features, design, pricing, and so 5 0
interchangeable and indistinguishable. The
forth. No two products or services are the
product/service is a commodity.
same.
Standard
Mean
Deviation
There are few large competitors that There are many small competitors in the
2.67 0.47
dominate the industry. industry.
Standard
Mean
Deviation
Companies in the industry are not the
Companies in the industry are about the same
same size - there are both large and small 3.33 0.94
size.
competitors in the industry.
Standard
Mean
Deviation
Companies in the industry have low fixed Companies in the industry have high fixed 4.33 0.47
costs and spend relatively little on plant costs and spend a lot of money on plant and
and equipment. equipment.
Standard
Mean
Deviation
Production capacity, to be economically
Production capacity can be added in small,
feasible, must be done in large, expensive 5 0.82
inexpensive increments.
increments.
Standard
Mean
Deviation
Significant barriers hinder companies that
Little prevents companies from voluntarily want to exit the industry (e.g., regulations,
5 0.82
exiting the industry. labor agreements, costs of closing facilities,
no secondary market for assets.)
Standard
Mean
Deviation
Staying in the industry is of little strategic Staying in the industry is of great strategic
importance to companies in the industry – importance to companies in the industry – they 4.67 1.25
they have somewhere else to go. have nowhere else to go.
Standard
Mean
Deviation
Companies in the industry are similar in Companies in the industry are diverse in their
their history and culture and in how they history and culture and in how they do 3.33 0.47
do business. business.
Standard
Mean
Deviation
The product/service sold by the industry The product/service sold by the industry has
3.33 0.94
has low storage costs or is not perishable. high storage costs or is highly perishable.
Standard
Mean
Deviation
The industry is experiencing fast market The industry is experiencing slow market
6 0
growth. growth.
Here are some suggested strategies and tactics you might consider:

• Find new ways to differentiate your product/service that have value to the customer. Even if your product is a
commodity, there are ways to differentiate it in terms of the services that surround it. Differentiation can occur from
the very first time customers becomes aware of your product to the time when they must dispose of it.
• If you’re thinking about building a new plant, don’t be preempted by one of your competitors. If a competitor builds
its plant first, it may suck up any future growth and shut you out.
• Help weak competitors exit the industry. Make it easy for them to get out. Buy up their assets even if they have little
value. The value comes in getting them out of the industry and reducing the number of competitors.

• When industry growth is slow, continued growth comes at the expense of competitors. You have to decide if you
can win the market share battle. If not, seek out new markets or market segments that may be growing faster.
Alternatively, you can sell out to stronger competitors and find something else to do.
3. SUPPLIERS

Suppliers are a moderate force in the industry. Powerful suppliers drive down the profitability of companies in the industry
because they can charge higher prices for the products and services they sell. Weak suppliers are not likely to bargain on
price or impose demands on companies in the industry. Here are some suggested strategies and tactics you might consider to
reduce the power of suppliers.
Standard
Mean
Deviation
There are a few concentrated suppliers
There are many suppliers that provide
who provide most of the raw materials to 5 0.82
raw materials to the industry.
the industry.
Standard
Mean
Deviation
Companies in the industry can easily
It is very costly for companies in the industry
switch from one supplier to another 4 0.82
to switch from one supplier to another.
with minimal cost.
Standard
Mean
Deviation
Companies in the industry could Companies in the industry are not likely to
backward-integrate if desired (i.e., backward-integrate (i.e., acquire one or 1.67 0.47
acquire one or more of their suppliers). more of their suppliers).
Standard
Mean
Deviation
Companies in the industry being Companies in the industry being analyzed
analyzed are the primary source of are only a minor source of revenues for the 2.33 0.47
revenues for the suppliers. suppliers, which have bigger fish to fry.
Standard
Mean
Deviation
If raw -material costs get out of line, If raw-material costs get out of line,
companies in the industry could use a companies in the industry could not use
different type of raw material to produce a different raw material to produce the 5 0
the product/service (plastic substituting for product/service (e.g., plastic substituting
steel). for steel).
Standard
Mean
Deviation
Companies in the industry determine the The quality and costs of raw materials
quality/cost of their product/service. Raw have a significant impact on the
5.33 0.47
material quality and cost are of minor quality/price of the products/services
importance. produced by the industry.
Standard
Mean
Deviation
The raw materials provided by
The quality and costs of the raw materials
suppliers are essentially
provided by suppliers to the industry are
interchangeable and indistinguishable. 2 0
very different from one another. No two
The raw materials are essentially
suppliers are the same.
commodities.
Standard
Mean
Deviation
Suppliers are not likely to forward- Suppliers could if desired forward-integrate
integrate (i.e., acquire a company in the (i.e., acquire a company in the industry 2.67 0.94
industry being analyzed). being analyzed).
Here are some suggested strategies and tactics you might consider:

• Be on the constant lookout for alternative raw materials to use instead of your current raw materials. What could you
use as a substitute that has similar characteristics but is more of a commodity?

• Acquire one or more key suppliers if they are adding more value to the end product than you are. Move down the
value chain if you want to reap more profits. Turn a cost center into a profit center. If your suppliers are making more
than you are, you need to be doing what they do.
4. SUBSTITUTE PRODUCTS

A substitute product provides the same functionality but is not identical to potentially competitive products. For instance, train
travel is a substitute for air travel since both are a means of traveling long distances; movies are a substitute for television
since both provide visual entertainment. Substitute products are a very weak force in the industry. Substitute products
constrain industry profitability by limiting the selling price companies in the industry can charge. If air fares rise too high,
people will start using trains. Moreover, if the quality of the substitute is higher, buyers will switch to the substitute. That’s why
more people fly than take the bus across country. Here are some suggested strategies and tactics you might consider to
reduce the threat of substitute products.
Standard
Mean
Deviation
It is costly for customers/buyers to switch It is easy for customers/buyers to switch from
4.67 0.47
from one source of supply to another. one source of supply to another.
Standard
Mean
Deviation
The price of substitute products is more
The price of substitute products is cheaper. 0.33 0.47
expensive.
Standard
Mean
Deviation
The quality, features and benefits of The quality, features and benefits of substitute
0.33 0.47
substitute products are generally lower. products are generally higher.

5. NEW ENTRANTS

New entrants are potential competitors. New entrants are a weak force in the industry. The easier it is for new companies to
enter the industry the greater the competition in the industry. New entrants will often attempt to break into the industry with low
prices, innovative products, or new features and benefits. When it is difficult to enter an industry, the threats of new entrants is
low. Here are some suggested strategies and tactics you might consider to reduce the intensity of rivalry with competitors.
Standard
Mean
Deviation
It is costly for customers/buyers to switch It is easy for customers/buyers to switch
4.67 0.47
from one source of supply to another. from one source of supply to another.
Standard
Mean
Deviation
The products/services offered by companies
The products/services offered by
in the industry are very different from one
companies in the industry are essentially
another in features, design, pricing, and so 5 0
interchangeable and indistinguishable. The
forth. No two products or services are the
product/service is a commodity.
same.
Standard
Mean
Deviation
Economies of scale play a significant
Economies of scale have little or no impact on
role in the cost of produce the 1.67 0.47
the cost of produce the product/service.
product/service.
Standard
Mean
Deviation
Companies in the industry have low fixed Companies in the industry have high fixed
costs and spend relatively little on plant costs and spend a lot of money on plant and 2.67 0.47
and equipment. equipment.
Standard
Mean
Deviation
Governmental regulations have little or no
Governmental regulations make it difficult
impact on whether new companies enter the 2.67 1.25
for new companies to enter the industry.
industry.
Standard
Mean
Deviation
Competitors in the industry will defend
Competitors in the industry are not likely to cut
their market position by aggressively 1.67 0.47
their price to defend their market position.
cutting price.
Standard
Mean
Deviation
New entrants would have a hard time
New entrants could easily gain access to the
gaining access to the industry’s 2 0.82
industry’s distribution channels.
distribution channels.
Standard
Mean
Deviation
Patents, proprietary knowledge, and brand
Patents, proprietary knowledge, and brand
reputation will make it difficult for new
reputation are not a barrier for companies 1.67 0.47
companies to successfully enter the
entering the industry.
industry.
Standard
Mean
Deviation
The industry is experiencing fast market The industry is experiencing slow market
1 0
growth. growth.
Here are some suggested strategies and tactics you might consider:

• Find new ways to differentiate your product/service that have value to the customer. Even if your product is a
commodity, there are ways to differentiate it in terms of the services that surround it. Differentiation can occur from
the very first time customers becomes aware of your product to the time when they must dispose of it.