1) The threat of substitute products

What products could your customers buy instead of yours? Be aware that substitute products can come in many shapes and sizes, and do not always come from traditional competitors. Substitutes essentially place a price ceiling on products. It’s more difficult for a firm to try to raise prices and make greater profits if there are close substitutes and switching costs are low. But, in some cases, customers may be reluctant to switch to another product even if it offers an advantage. Customers may consider it inconvenient or even risky to change if they are accustomed to using a certain product in a certain way, or they are used to the way certain services are delivered

2) The threat of the entry of new competitors

How easy is it for businesses to enter your market? You may have the market cornered with your product, but your success may inspire others to enter the business and challenge your position.  New entrants bring a desire to gain market share and often have significant resources. Their presence may force prices down and put pressure on profits. Analyzing the threat of new entrants involves examining the barriers to entry and the expected reactions of existing firms to a new competitor.

3) The intensity of competitive rivalry

Rivalry among competitors is often the strongest of the five competitive forces, but can vary widely among industries. If the competitive force is weak, companies may be able to raise prices, provide less product for the price, and earn more profits. If competition is intense, it may be necessary to enhance product offerings to keep customers, and prices may fall below break-even levels.
For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively on price and sometimes on non-price dimensions such as innovation, marketing, etc.

4) The bargaining power of customers

The power of buyers describes the effect that your customers have on the profitability of your business. The transaction between the seller and the buyer creates value for both parties. But if buyers (who may be distributors, consumers, or other manufacturers) have more economic power, your ability to capture a high proportion of the value created will decrease, and you will earn lower profits.

Buyers have the most power when they are large and purchase much of your output. If your business sells to a few large buyers, they will have significant leverage to negotiate lower prices and other favorable terms because the threat of losing an important buyer puts you in a weak position. Buyers also have power if they can play suppliers against each other. In the automotive supply industry, the large car manufacturers have significant power. There are only a few large buyers, and they buy in large quantities. But, when there are many smaller buyers, you will have greater control because each buyer is a small portion of your sales

5) The bargaining power of suppliers

Any business requires inputs—labor, parts, raw materials, and services. The cost of your inputs can have a significant effect on your company’s profitability. Whether the strength of suppliers represents a weak or a strong force hinges on the amount of bargaining power they can exert and, ultimately, on how they can influence the terms and conditions of transactions in their favor. Suppliers would prefer to sell to you at the highest price possible or provide you with no more services than necessary. If the force is weak, then you may be able to negotiate a favorable business deal for yourself.

Conversely, if the force is strong, then you are in a weak position and may have to pay a higher price or accept a lower level of quality or service.  Suppliers have the most power when the input(s) you require are available only from a small number of suppliers, the inputs you require are unique, making it costly to switch suppliers, your input purchases don’t represent a significant portion of the supplier’s business, suppliers can sell directly to your customers, bypassing the need for your business, it is difficult for you to switch to another supplier, or you do not have a full understanding of your supplier’s market.