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“A framework for analyzing the balance of power within a particular industry and hence its overall profitability. The frame identifies five forces in the microenvironment that drive competition and threaten a firm’s ability to make profits:
(1) rivalry between existing competitors (depending on e.g. their number, size, and relative market shares);
(2) the threat of new entrants (i.e. the extent to which there are significant barriers to entering a market);
(3) the threat of substitutes (i.e. products in another industry that the consumer may see as alternatives);
(4) the strength of buyer power; and
(5) the strength of supplier power.
Forces (2), (3), (4), and (5) all feed back into force (1) by driving up competitive rivalry. The five-forces model is probably the most widely used tool in industry structure analysis and is also a popular starting point in strategic management planning. It was developed by Michael E. Porter of Harvard Business School in the late 1970s.”