Porters Five Forces Model
Home ] Up ] Contents Page ] Search Page ] Feedback Page ] Sumbit a Site ]

Buy This Site!



Web-Site Visitor Statistics

Reader Offers

Coming Soon 


The five forces model in essence is an extension of the SWOT and PEST analysis. The concepts within the model are shown below:

The five forces model is significant in the sense that we use it to examine the competitive environment. Starting at the centre, we look at our competitors, to see the extent of competitive rivalry that exists. The next thing we would look at is the power of buyers and suppliers in the marketplace which affect the business, this is important as buyer/supplier arrangements can mean hindrances for certain markets, for example the distribution system for coca-cola/pepsi in pubs and bars where you will only see one brand being sold not both. In other markets buyers/suppliers may be offered exclusive deals in return of buying/supplying only one brand.

The next step of the analysis is to look at the threat of substitute products in the market place, what products are in the marketplace which do the same thing as your products but are not quite the same? for example in pharmaceutical markets asprin, disprin, paracetomol, ibuprofen,etc. The next step is to look at the state of the marketplace and see what the potential new entrants may be,  where are the new products coming from?.

The next step, away from the five forces, which are all internal market factors, is to examine external from market influences, by this we mean looking at changing consumer tastes, the state of the economy, the level of government legislation and the global market.

Although the Porter (1980) five forces model may at first appear rather simple, once the information it requires is collated, it will provide valuable information.

Porter does extend his five forces model by discussing 'barriers to entry' which could prevent the emergence of competition within any given market:

  • ECONOMIES OF SCALE - This is based on the assumption that the more a product is produced with the same fixed costs, the cheaper the cost per part produced arises.

  • THE CAPITAL COST OF ENTRY - Effectively the costs of setting up and entering a market.

  • ACCESS TO DISTRIBUTION CHANNELS - Based on the logic tat the more distribution channels exist then the more that marketplace will be open.

  • COST ADVANTAGES INDEPENDENT OF SIZE - It is difficult for a competitor to break into a market if there is an established operator who knows the market well and has good relationships with buyers and suppliers.


  • DIFFERENTIATION - The difference between one product and another.

Back to Marketing Main Menu

(c) eCommerce-Now.com  Est 08/00 - Last Updated 28/05//2001