WORKSHEET ON INDUSTRY ATTRACTIVENESS - PORTER'S FIVE

I. Barriers to Entry and/or Mobility	Yes	No
	(+)	(-)
Do large incumbent firms have a cost or performance advantage in your segment of the industry`? Do costs decline significantly with volume? (called scale economies.)
Are there any proprietary product differences in your industry? For example, are products protected by patents?
Are there established brand identities in your industry?
Do your customers incur any significant costs in switching suppliers? For example, to change suppliers do customers have to invest in learning new programs, or procedures (e.g., computer software)?
Is a lot of capital needed to enter your industry? (A new semiconductor fabricating facility cost over $1 billion.)
Is serviceable used equipment unavailable/expensive? For a counter example, there is a well developed market for used aircraft. Aircraft are widely available to airlines; although prices vary depending on demand.
Does the newcomer to your industry face difficulty in accessing distribution channels? Traditionally in the pharmaceutical industry it has been difficult for small (generic) companies, because they lack a detail sales force, to get their products accepted by prescribing physicians.
Does experience help you to continuously lower costs? Different than scale economies, experience effects are not directly related to volume. Experience effects mean incumbent firms have figured out how to do it better and cheaper; and it would be difficult for less experienced firm to gain this knowledge without going through the same process. (i.e., The experience advantage is path dependent.)
Does a newcomer have any problems in obtaining the necessary skilled people, materials or suppliers? It is difficult to enter the mining industry unless you have access to a low cost mineral source.

II. Bargaining power of buyers:	Yes	No
(to what extent are your customers locked into you)	(+)	(-)
Is there a large number of buyers/customers relative to the number of firms in the business? Do you have a large number of customers, each with relatively small purchases?
Your product is a small part of the cost but critically affects the value of your customers' end product. For example, beer cans are coated on the inside with a plastic-like film. The film cost very little but if it fails the taste of the beer is adversely affected.
Does the customer face any significant costs in switching suppliers?
Does the buyer need a lot of important (technical) information to inform their purchasing decision?
Is the buyer aware of the need for additional information?
Is there anything which prevents customers from taking your function in-house? For example, can manufacturers worry that their customers (the packers) will backward integrate into container manufacture.
Customers are not highly sensitive to price'?
Products in this industry are unique, or there are accepted brands?
My customers' businesses are profitable?

	Yes	No
	(+)	(-)
Is the industry growing slowly?
There are no accepted product standards or specifications. There is no industry standard setting or certification body.
Are there any licenses, insurance or qualifications which are difficult to obtain?
There is no obvious point of entry? Potentially viable strategies have either been attempted by, or are currently being executed by incumbent firm.
Can the newcomer expect strong retaliation on entering the market? Have incumbent firms reacted strongly in the past? Do industry economics (high fixed, low variable cost) suggest that incumbents will react?

Ill. Threat of substitutes:	Yes	No
(some other product or service which performs the same job as yours)	(+)	(-)
Substitutes have performance limitations which do not completely offset their
lower price, or their performance advantage is not justified by their higher price.
My customer will incur costs or critical uncertainties in switching to a substitute.
My customer has no real substitute. A counter example, high fructose corn syrup became a substitute for sugar in many industrial applications.

IV. Bargaining power of suppliers:	Yes	No
My inputs (materials, labour, supplies, services, etc) are commodities, rather than unique or differentiated.
The quality of inputs is not critical to my finished product.
I can switch between suppliers quickly and cheaply.
My suppliers would find it difficult to enter my business, or would find it difficult to perform my function in-house.
I can substitute inputs readily.
I have many potential suppliers.
My business is important to my suppliers.
My cost of purchases does not have a significant influence on my overall costs.

V. Determinants of rivalry among existing competitors	Yes	No
	(+)	(-)
My industry is growing rapidly.
There are few incumbent competitors.
My competitors are all of approximately the same size as me.
The industry is not cyclical with intermittent over-capacity.
The fixed costs of the business are a relatively low portion of total costs.
There are significant product differences and brand identities between the competitors.
My "manufacturing or distribution" process have unique or proprietary features which give me lower costs or a higher value product?
My competitors are diversified rather than specialized.
It would not be hard to get out of this business because there are no specialized skills and facilities or long term contract commitments, etc.
My customers would incur significant costs in switching to a competitor. One factor that kept IBM dominate in the computer business for so long was the cast and uncertainty of switching to another suppliers. "Nobody gets fired for buying IBM."
My product is complex and non-standardized. It requires a detailed understanding on the part of my customer.

Overall industry rating:	Favorable (yes)	Moderate	Unfavorable (no)
Threat of new entrants.
Bargaining power of buyers.
Threat of substitutes.
Bargaining power of suppliers.
Intensity of rivalry among competitors.