analyze-five-forces

Analyze industry structure using Porter's Five Forces. Use when asked to assess industry attractiveness, competitive dynamics, profit potential, or structural threats.

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name	analyze-five-forces
description	Analyze industry structure using Porter's Five Forces. Use when asked to assess industry attractiveness, competitive dynamics, profit potential, or structural threats.

Analyze Five Forces

Purpose: Diagnose the structural forces that determine industry competition and long-run profit potential, using Porter's exact framework from Competitive Strategy.

Input

Required: Industry name or description
Optional: Specific data on competitors, suppliers, buyers, substitutes, or entrants

Output

Force-by-force assessment with sub-factor ratings
Overall industry attractiveness (profit potential)
Identification of the governing force(s)
Strategic implications

Procedure

For each force, assess EVERY sub-factor below. Rate each sub-factor High / Medium / Low for its contribution to force strength, then rate the overall force.

Force 1: Threat of Entry

Assess the barriers to entry that determine how easily new firms can enter. Higher barriers = lower threat.

Sub-factor	What to assess
Economies of scale	Do unit costs decline significantly with volume across manufacturing, R&D, marketing, distribution? Must entrants come in at large scale or accept cost disadvantage?
Product differentiation	Do incumbents have strong brand identification and customer loyalty? Must entrants spend heavily to overcome?
Capital requirements	How large is the financial investment to compete, especially unrecoverable up-front costs (advertising, R&D)?

Sub-factor	What to assess
Numerous or equally balanced competitors	Are there many firms, or few firms of similar size and resources? Neither can dominate.
Slow industry growth	Does slow growth turn competition into a market-share fight rather than expansion?
High fixed or storage costs	Do high fixed costs create pressure to fill capacity, leading to price cutting?
Lack of differentiation or switching costs	Is the product a commodity? Can buyers switch freely, making choice based on price and service?
Capacity augmented in large increments	Must capacity be added in large blocks, disrupting supply-demand balance and causing overcapacity?
Diverse competitors	Do competitors differ in strategies, origins, personalities, and parent relationships? Foreign firms, owner-operators, and firms using the market as an outlet for excess capacity increase volatility.
High strategic stakes	Do firms have strong motives (corporate strategy, global prestige) to succeed here, making them willing to sacrifice profitability?
High exit barriers	Do specialized assets, fixed costs of exit, strategic interrelationships, emotional barriers, or government restrictions keep firms competing even with poor returns?

Sub-factor	What to assess
Buyer concentration or large volume purchases	Do buyers purchase large quantities relative to seller sales? Especially powerful when seller has high fixed costs.
Products are standard or undifferentiated	Can buyers always find alternative suppliers and play them against each other?
Buyer faces few switching costs	Is the buyer free to change suppliers without penalty?
Buyer earns low profits	Do low profits create aggressive incentive to lower purchasing costs?
Threat of backward integration	Can the buyer credibly manufacture the product itself?
Product is unimportant to buyer's quality	Is the purchased input non-critical to the buyer's own product quality or performance? Makes buyer more price-sensitive.
Buyer has full information	Does the buyer know actual demand, market prices, and supplier costs? Full information yields maximum leverage.

Sub-factor	What to assess
Supplier concentration	Is the supplier group dominated by a few companies and more concentrated than the industry it sells to?
Availability of substitutes	Must the supplier contend with substitute products? Lack of substitutes increases power.
Industry is not an important customer	Is the purchasing industry a small fraction of the supplier's sales? Suppliers exert more power when not dependent on the industry.
Supplier's product is important input	Is the input critical to the buyer's manufacturing process or product quality? Especially if non-storable.
Differentiation or switching costs	Is the supplier's product differentiated or does it create buyer lock-in? Cuts off ability to play suppliers against each other.
Threat of forward integration	Can the supplier credibly enter the buyer's industry? Checks the industry's ability to demand better terms.

Sub-factor	What to assess
Price-performance of substitutes	Does a substitute offer a superior price-performance tradeoff? Places a ceiling on industry prices.
Switching costs to substitutes	How costly or difficult is it for buyers to switch to the substitute?
Buyer propensity to substitute	Are buyers actively exploring or adopting alternatives?

# Five Forces Analysis: [Industry]

## 1. Threat of Entry: [High/Medium/Low]
- Economies of scale: [rating] -- [1-2 sentence justification]
- Product differentiation: [rating] -- [justification]
- Capital requirements: [rating] -- [justification]
- Switching costs: [rating] -- [justification]
- Access to distribution: [rating] -- [justification]
- Cost disadvantages independent of scale: [rating] -- [justification]
- Government policy: [rating] -- [justification]
- Expected retaliation: [rating] -- [justification]

## 2. Rivalry Among Competitors: [High/Medium/Low]
[Same pattern for all sub-factors]

## 3. Bargaining Power of Buyers: [High/Medium/Low]
[Same pattern for all sub-factors]

## 4. Bargaining Power of Suppliers: [High/Medium/Low]
[Same pattern for all sub-factors]

## 5. Threat of Substitutes: [High/Medium/Low]
[Same pattern for all sub-factors]

## Synthesis
- **Governing force(s):** [which force(s) dominate and why]
- **Overall profit potential:** [High/Medium/Low] -- [explanation]
- **Strategic implications:** [2-3 actionable observations about positioning]