According to Porter’s five forces framework the competitive environment in an industry is influenced by five forces:
• The Threat of new entrants;
• The Threat of substitute products;
• The Rivalry among existing firms;
• The Bargaining power of buyers;
• And the Bargaining power of suppliers.
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The five forces model teaches us that competition has multiple dimensions. It is important how many direct competitors we have, but it is also important if clients can choose to use alternative products, or if new entrants are likely to enter the market and increase current levels of competition. In addition, we shouldn’t forget that clients and suppliers can have a very strong bargaining power, and dictate the terms if the companies in an industry are unable to do anything about it.
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