Is there a cost to the buyer for switching?.Is there a perceived level of differentiation?.How many substitute products to your own are there?.The more products that continue to appear, the higher the chances your customers will be drawn to an alternative from their usual choice. For example switching from a regular phone to a smartphone, or fromĪ sugary snack to a healthy alternative snack. This is not the same as switching to a different company to use the same product but switching products entirely. Is there any Government policy in place to either encourage or discourage new entrants?Ĭustomers may choose to substitute your product or service for another.Is there evidence of economies of scale in play in your industry?.Do you have specialist knowledge that can be used to differentiate you?.Entry barriers may include rights, patents, technology protection etc. Are there many entry barriers? High entry and low exit barriers makes for an attractive industry.The threat of new entrants canīe lowered or even blocked by the largest companies that have somewhat of a monopoly over the industry. If too many new entrants appear then profitability across the industry will be lowered and the attractiveness will decline.
If an industry is perceived as attractive then of course new entrants are highly likely to appear.
Do your competitors have more advertising resources?.Are you being innovative in order to give you the competitive advantage?.Do you have a solid competitive strategy in place?.So how do we as marketers assess the level of competitive intensity in our industry? Well Porter believes there are five factors, or five forces acting upon your organisation that will determine this (hence the name!) The Five Forces: Competitive Rivalry:Ĭlearly a key factor in competitive intensity will be competitive rivalry.
When we talk about industry attractiveness we are talking about the profitability of the industry not how much we like it! Porter believed that by understanding the level of competitive intensity, you could determine the attractiveness of that industry. As the name suggests, the concept was created by a fellow by the name of Michael E. This one is used to assess the level of competitive intensity within your industry. Porter's five forces is another tool belonging to the marketer’s strategy toolkit. Visit our Marketing Theories Page to see more of our marketing buzzword busting blogs.
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