The purpose of five-forces analysis

• The five forces are environmental forces that impact on a company's ability to compete in a given market 
• The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is 

Threat of New Entrants 

Economies of Scale 

Product Differentation 

Capital Requirements 

Switching Costs 

Access to Distribution Channels 

Cost Disadvantage Independent of Scale 

Government Policy 

Expected Retaliation 

Vargaining Power of Suppliers 

Supplier Exert power in the industry by - Threatening to raise prices or to reduce quality powerful suppliers can squeeze industry profitability if firms are uanble to recover cost increase 

Suppliers are likely to be powerful if : 

- Supplier industrty is dominated by a few firms 

- Suppliers products have few substitutes 

- Buyer is not an important customer to supplier 

- Suppliers product is an important input to buyer's product 

Suppliers products are differentiate 

Suppliers products have high switching costs 

Supplier poses credible threat of forward integration