# Michael Porter's 5 + 1 Framework - Evaluates the influence of the market participants regarding who gets the [[profit]]s within an industry. - Explains why [[profit]]s vary across the industry ecosystem and between industries. > [!summary] Five Forces Plus One > > - Existing Industry Competitors (in the center) > - Potential New Entrants > - Suppliers > - Customers > - Substitute Products/Services > - Complementary Products/Services ## Industry Competitors Rivalry between existing firms. - Price-based drivers - Undifferentiated products and low switching costs. - High fixed-costs industries - Perishability -- cut prices or lose - Intense industry conditions -- slow growth, static market ## New Entrants Barriers of Entry can be a challenge to new entrants. - Economies of scale (e.g. Walmart) - Customer switching costs (e.g. aircraft manufacturer) - Capital requirements (e.g. manufacturing equipment) - Incumbency advantage (e.g. mining companies) - Access to distribution channels (e.g. P&G and their retailer relationships) - Access to suppliers - Government policies - High barriers to exit ## Supplier Supplier Bargaining Power Factors - Supplier concentration (e.g. airplane engines) - Industry switching costs (e.g. network hardware) - Differentiated products (e.g. QLED/OLED vs LED) - Few/no substitutes (e.g. patented pharmaceuticals) - Forward integration (e.g. Apple Stores) - Low dependence on single industry (e.g. steel industries) ## Buyer Buyer Bargaining Power Factors - Customer concentration (e.g. Costco volume buying) - Low customer switching costs (e.g. airline customers) - Undifferentiated products (e.g. grocery stores buying fresh fruit) - Backward integration (e.g. Netflix creating its own content) ## Substitutes - Competes from outside the industry - Zoom vs travel, e-mail vs snail mail ## Complements - The financial results of the complements can enhance the overall industry profitability. - Slow growing industries makes compliments more enticing. - e.g. Hotdogs and hotdog buns. iPhones and cars with CarPlay