Effective for understanding the competitive intensity of an industry. The five forces include: the threat of potential entrants to the market, the threat of substitute products or services, the trading power of customers, the trading power of suppliers, and the intensity of rivalry among competitors.
Empathize
Research Data
Understanding of the forces at play in an industry
30 min to 1 hr
2/5
2 – 5 (participants)
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Using industry information, ask: Who might be new entrants to the market? How high are the barriers of their entry? How vulnerable is the industry to threats from these new entrants?
Identify: time and cost of entry, specialist knowledge, economies of scale, cost advantages, technology protection, barriers of entry.
How willingly customers may switch to alternative or substitute offerings. How vulnerable is the industry to the threats from such substitute offerings?
Identify: substitute performance, cost of change.
How much control customers have dictating what kinds of products and services are available in the industry? How much influence do customers have in pricing or other attributes of the offering?
Identify: number of customers, size of each order, competitor comparison, price sensitivity, ability to substitute, cost of change.
How suppliers exert their demands? How reliant is the industry on the suppliers? How much control do suppliers have in determining the kinds of products and services the industry produces?
Identify: number of suppliers, size of suppliers, uniqueness of service, ability to substitute, cost of change.
Understand the nature of rivalry among competitors. Is it technology driven, price driven, or service driven? Is the rivalry consistent across competitors or variable?
Identify: number of competitors, quality differences, other differences, cost of change, customer loyalty, costs of leaving market.
