Discuss and explain briefly Porter's five-face model.

Degree of existing rivalry. Determined by number of firms, relative size, degree of differentiation between firms, demand conditions, exit barriers.

2. Threat of potential entrants. Determined by attractiveness of industry, height of entry barriers (for example, start-up costs, brand loyalty, regulation, etc.).
4. Bargaining power of suppliers. Determined by number of suppliers and their degree of differentiation, the portion of a firm's inputs obtained from a particular supplier, the portion of a supplier's sales sold to a particular firm, switching costs, and potential for vertical integration.
6. Bargaining power of buyers. Determined by number of buyers, the firm's degree of differentiation, the portion of a firm's inputs sold to a particular buyer, the portion of a buyer's purchases bought from a particular firm, switching costs, and potential for vertical integration.
8. Threat of substitutes. Determined by number of potential substitutes, their closeness in function and relative price.

  

Recently Porter has acknowledged the role of complements. Must consider:

2. how important complements are in the industry.
4. whether complements are differentially available for the products of various rivals (impacting the attractiveness of their goods), and.
6. who captures the value offered by the complements.