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Porter's Five Forces ModelPrepared by Rohan Wickremasinghe

AIB (SL), Dip Mgt., MBA (SGU), Dip B. (BPUSL)

The five forces model developed by Michael E. Porter guides the analysis of

organization's environment and the attractiveness of the industry. The five forces include

the risk ofnew competitors entering the industry, threat of potentialsubstitutes, the

bargaining power ofbuyers, the bargaining power ofsuppliers, and degree of rivalry

between the existing competitors (Porter, 1985). Environmental scan identifies external

opportunities and threats, evaluates industry's overall attractiveness, and identifies factors

contributing to, or taking away from, the industry attractiveness. Through organization's

choice of strategy it can alter the impact of these forces to its advantage.

This is a graphical interpretation of Porter's five forces model (Porter, 1985, p. 5):

SUPPLIERS

Bargaining

Power of

Suppliers

POTENTIAL

ENTRANTS

Threat of

new

Entrants

INDUSTRY

COMPETITORS

Rivalry among

Existing Firms

BargainingPower of

Buyers

BUYERS

Threat of

Substitute

s

SUBSTITUTES

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