Porter's Five Forces

Porter's Five Forces is a great tool to analysis how the external envoirnoment in general to affect the attractiveness on a segment of industry that we are interested in. As we discuss in the class, the 5 forces are:

• Threat of new entrants
• Bargining power of suppliers
• Bargining power of buyers
• Threat from substitutes
• Intensity of rivalry

If we can have accurate information on the above 5 areas and we have our own strength that is strong enough to face those 5 external influences, we are at a very good position to run the business. However, I believe that the Porter's 5 forces just provides a general insight of the external envoironment. In order to the be success, we need to 'look in deep' of the external envoirnment. I would like to add on more area to the 5 forces in order to make it to a complete external envoironment analysis. They are (if applicable):

• Industry Life Cycle Analysis
• Econimic Condition Analysis
• Consumer Analysis
• Political/Legal Analysis
• Technology
• Global Trend/Condition Analysis

Here is an Porter's 5 Forces Analysis for OutBack Steak House(Full Service Restaurant (FSR)sector of Restaurant Industry).

• Threat of new entrants: LOW-Saturated and competitive FSR industry
• Bargaining power of suppliers: HIGH-No accepteable substitutes for good grade beef from other sources.
• Bargaining power of buyers: HIGH-Price sensitive buyers with low switching costs. Many choices of steak house in the FSR industry.
• Threat from substitutes: MODERATE-substitutes include cooking at home, fast food, other convenience foods and other type of cusines. Higher trend of eat out families now because working women in the market.
• Intensive of rivalry: VERY INTENSE-Numerous competitors in the market with similiar strength: Applebee's, TGI Fridays, Chill's). Saturated market of FSR industry sector.

Information Sources: Restaurant Industry Forecast 2006 & 2007.