What are the five forces in Porter’s Five Forces framework?

• A. The threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and intensity of competitive rivalry.
• B. The threat of government regulation, tax policy, currency exchange rates, labor costs, and interest rates.
• C. The five performance metrics: revenue, profit, growth, market share, and brand power.
• D. The five stages of product life cycle: introduction, growth, maturity, decline, and renewal.

Answer: (A)

Porter’s Five Forces is a way to gauge how attractive an industry is by looking at external pressures that shape profitability. The five forces are: how easy it is for new competitors to enter the market (threat of new entrants), how much power suppliers have over prices and terms (bargaining power of suppliers), how much power buyers have to push down prices or demand better terms (bargaining power of buyers), how easily customers can switch to alternative products or services (threat of substitute products or services), and how intensely existing firms compete with one another (rivalry among existing competitors). Each force influences margins and long-run profitability, so a market with high entry barriers, weak supplier power, modest buyer power, few substitutes, and mild rivalry tends to be more attractive.

The other options describe factors that aren’t part of this framework. Regulatory or macroeconomic factors like government rules, taxes, currency, or interest rates influence the environment but aren’t the five forces themselves. Performance metrics such as revenue or market share, or stages of the product life cycle, are different concepts and not the competitive pressures Porter identifies.