Strategic Analysis and Choice

Chapter 5

Porter’s Five Forces Model, Part 2

The Power of Suppliers, Buyers, Substitutes, and Rivalry

Introduction

In the last chapter, you saw that low barriers to entry can allow entrants to attack and siphon off industry profits, according to Porter. There are, however, four other significant forces that can do the same. In this chapter, we’ll first assess how suppliers and buyers can extract profits from industry firms, as they have much in common. The first issue to keep in mind is that we are concerned with the power of suppliers to and buyers from the focal industry. Consider Figure 5.1; here we see that for the auto industry the suppliers include steel firms, electronics and integrated chip manufacturers, drive train and engine producers, ...