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Porter’s Five Forces: Scorecard

Porter’s Five Forces Scorecard

A good Five Forces analysis will cause you to sift through a lot of data, much of it conflicting and confusing. Below is a series of scorecards that try to condense the most important points from your Five Forces analysis and present them to you in an easily understandable format.

The scorecards rate the attractiveness of an industry’s five forces from the perspective of a new venture attempting to enter the industry. Each force gets its own scorecard. Each scorecard has the main factors that help determine the strength the force exerts upon the industry. A factor’s attractiveness is rated on a five category scale that ranges from Highly Unattractive, Mildly Unattractive, Neutral, Mildly Attractive, to Highly Attractive. For each factors’ rating, the top line (yellow) indicates the level of the factor’s level of attractiveness at present. The bottom line (green) is the entrepreneur’s rating of what he or she thinks each factors’ level of attractiveness will be in the future. The level of future attractiveness for a factor is determined by analyzing how macroenvironmental forces will affect the industry in the future.

Directly below is a hypothetical example scorecard of an industry’s intensity of rivalry:

 

Present

 

Future

Highly Unattractive

Mildly Unattractive

Neutral

Mildly Attractive

Highly Attractive

Industry Competitive Structure

Highly Concentrated

Fragmented

Industry Demand

 

Falling

Rising

Differentiation of Value Propositions

Little or None

Highly Differentiated

Cost Conditions

 

High Fixed Costs

Low Fixed Costs

Exit Barriers

 

High

Low

         

Remember, none of this is exact science. There is no mathematical formula that determines whether you should enter an industry or not. The purpose of this exercise is to ensure that you, the entrepreneur, have thoroughly thought about the nature and future of the competitive environment you are proposing to jump into.

Force One: Intensity of Rivalry among Industry Competitors

Present

 

Future

Highly Unattractive

Mildly Unattractive

Neutral

Mildly Attractive

Highly Attractive

Industry Competitive Structure

Highly Concentrated

Fragmented

Industry Demand

 

Falling

Rising

Differentiation of Value Propositions

Little or None

Highly Differentiated

Cost Conditions

 

High Fixed Costs

Low Fixed Costs

Exit Barriers

 

High

Low

         

Force Two: Risk of Entry by Potential Competitors

Present

 

Future

Highly Unattractive

Mildly Unattractive

Neutral

Mildly Attractive

Highly Attractive

Capital Requirements

Very High

Little

Economies of Scale

 

Significant

Insignificant

Brand Loyalty

 

High

Low

Absolute Cost Advantages

 

High

Low

Customer Switching Costs

High

Low

Government Regulation

High

Low

         

Force Three: The Bargaining Power of Buyers

Present

 

Future

Highly Unattractive

Mildly Unattractive

Neutral

Mildly Attractive

Highly Attractive

Size and Number of Buyers Relative to Industry Suppliers

Very Big; Few

Small; Numerous

Buyers’ Bulk Purchasing Power

 

High

Low

Switching Costs of Buyers

Little or None

Significant

Threat of Vertical Integration by Buyers

High

Low

Substitutability of an Industries Value Propositions

High

Low

         

Force Four: The Bargaining Power of Suppliers

Present

 

Future

Highly Unattractive

Mildly Unattractive

Neutral

Mildly Attractive

Highly Attractive

Substitutability of Inputs

Highly Substitutable

Little or No  Substitutability

Bargaining Power of Suppliers

 

High

Low

Threat of Vertical Integration by Suppliers

High

Low

Dependency of an Industry’s Suppliers on that Industry

Low

High

         

Force Five: The Availability and Similarity of Substitutes to an Industry’s Value Propositions

 

Present

 

Future

Highly Unattractive

Mildly Unattractive

Neutral

Mildly Attractive

Highly Attractive

Similarity of Buyer Utility

High

Low

Substitute Availability

 

High

Low

Similarity of Factors of Competition

High

Low

         

And finally, the table below is a final snapshot evaluation of the industry’s attractiveness. To fill out this table, you should look at your ratings in the tables above as guidelines. The importance of the forces, and the factors that comprise them, will change from industry to industry. It will ultimately depend upon the unique facts and circumstances of each industry being evaluated. Therefore you will have to use your best judgment.

Overall Evaluation of Industry’s Attractiveness

 

Present

 

Future

Highly Unattractive

Mildly Unattractive

Neutral

Mildly Attractive

Highly Attractive

Intensity of Rivalry among Industry Competitors

High

Low

The Risk of Entry by Potential Competitors

High

Low

The Bargaining Power of Buyers

High

Low

         

The Bargaining Power of Suppliers

High

Low

Availability and Similarity of Substitute VPs

High

Low