The Competitive Environment

Porter's five forces: a model developed by Michael Porter to analyse the competitive environment in which a business operates; the five forces are: the threat of entry, buyer power, supplier power, competitive rivalry, and substitute threat

Entry threat: the threat to existing firms in the industry from new firms entering the industry and setting up in competition

Buyer power: The power buyers (customers) have over the supplier of a particular product; many buyers, each buying a small proportion of the total sales of a business, means less buying power than a few buyers who each buy a large proportion of total sales

Supplier power: The power suppliers have over the buyer of a particular product; many suppliers, each supplying a small proportion of total supplies of a business, means less supplier power than a few suppliers who each supply a large proportion of total supplies

Rivalry: The intensity of competition between firms in the industry - Porters called this 'jockeying for position'

Substitute threat: The threat to a firm's existing market share from substitute products that might be introduced by competitors