Standardize part specifications to switch vendors easily, neutralizing supplier power.

Expand services to increase customer switching costs, countering customer power.

Invest more heavily in differentiated products to temper price wars initiated by established rivals.

Elevate fixed costs of competing, like R&D expenditures, to scare off new entrants.

The threat of entry puts a cap on an industry's profit potential; high threat forces incumbents to deter new competitors.

The threat of entry depends on the height of entry barriers and expected retaliation from incumbents.

A supplier group is powerful if it is more concentrated than the industry it sells to.

A supplier group is powerful if it does not depend heavily on the industry for its revenues.

Industry participants face switching costs in changing suppliers, making it hard to play them off against one another.

A supplier group is powerful if it offers differentiated products.

A supplier group is powerful if there is no substitute for what it provides.

A supplier group is powerful if it can credibly threaten to integrate forward into the industry.

Buyers are powerful if they have negotiating leverage relative to industry participants, especially if they are price sensitive.

A customer group has negotiating leverage if there are few buyers, or each purchases large volumes relative to a single vendor.

A customer group has negotiating leverage if the industry's products are standardized or undifferentiated.

A customer group has negotiating leverage if buyers face few switching costs in changing vendors.

Buyers can credibly threaten to integrate backward and produce the industry's product themselves if vendors are too profitable.

Most buyer power sources apply equally to consumers and business-to-business customers, with consumers often more price sensitive for undifferentiated, expensive products.

Substitution threat can be downstream or indirect, replacing a buyer industry's product.

Substitutes are always present but easy to overlook because they may appear very different from the industry's product.

The degree rivalry drives down profit potential depends on its intensity and basis.

Strategists must trace the positive or negative influence of complements on all five forces to ascertain their impact on profitability.

Strategic decisions of leading competitors often significantly impact the threat of entry.

Mergers and acquisitions can alter industry rivalry by introducing new capabilities and ways of competing.

The five forces framework allows rigorous analysis of entry and exit, identifying industries with good future potential or poor structure.

Digital distribution created an illegal substitute, and major labels allowing Apple to create iTunes shifted industry structure against them.

In reshaping structure, a company wants competitors to follow, transforming the entire industry, with the innovator benefiting most.

Structure can be reshaped by redividing profitability in favor of incumbents or by expanding the overall profit pool.