Clearly define the boundaries of the industry you’re analyzing.
Refer to the “Industry Analysis” reading for guidance on factors to consider, such as customer needs, technology, and the competitive landscape.
Example: If your company is a social media platform, you might define the industry as “social networking platforms” or “online content sharing platforms”.
Identify the Players:
Identify the key players in each of the five forces:
Rivalry: Direct competitors within the industry.
New Entrants: Potential new competitors that could enter the market.
Substitutes: Products or services that could fulfill similar customer needs.
Buyers: The customers or users of the industry’s products or services.
Suppliers: The providers of inputs or resources to the industry.
Complementors: The creators of products that can increase the wedge between suppliers’ opportunity cost and customers’ willingness-to-pay in the focal industry.
Analyze the Strength of Each Force:
Evaluate the strength of each force using the factors described in the “Industry Analysis” reading (e.g., industry concentration, switching costs, barriers to entry).
Helpful Hints:
Start with the overall effect of the force and explain it using observations about the concentration, switching costs, and barriers to entry.
Use relevant quanitative data such as concentration ratio to describe the factors that explain the overall effect. See financial benchmarks section of IBISWorld reports for key ratios that could be used for this purpose.
Make sure to analyze the impact on customers’ willingness-to-pay and suppliers’ opportunity costs.
Assess Overall Industry Attractiveness:
Based on your analysis, determine the overall attractiveness of the industry in terms of profit potential.
Consider how the five forces collectively impact profitability.
Please remember not all forces have equal impact on all industries. Your evaluation of five forces must describe the varying importance of five forces and account for it.