Porter's Five Forces Analysis

Threat of Entry. What is it?

Threat of Entry

Companies depend on barriers to entry like customer loyalty, product differentiation, market share, and cost advantage to defend against the threat of new competitors.

Questions to Ask

How easy is it for new companies to enter the market?

Do incumbents have advantages? in price? brand loyalty? materials? location? experience?

Are there technological barriers to entry?

Are size and economies of scale important?

How do capital requirements and switching costs influence market entry?

Does government policy play a role?

Are distribution channels open or closed?


Financial and Capital Requirements

Research Industry Operating Conditions

Research Government Policy

Researching the regulatory environment of an industry involves looking at both the regulators and the positions of those affected by the regulations. Look for news from these actors:

  • Government executive departments like the Department of Transportation and regulatory agencies like FERC, the FDA, and the FCC, set regulations for industries in the United States. Search the A-Z Index of U.S. Government Departments and Agencies.for the agency website.
  • Committees of the United States  House and Senate regularly hold hearings on proposed legislation.
  • Trade associations represent the interests of their members in position papers and testimony before Congress. Find associations by searching Google or use Industry References list in S&P NetAdvantage's Industry Survey.

Research Technology Barriers

A company's intellectual property is often protected by patents on products or production methods. Companies often discuss their patents in their 10-K report. Read Item 1 - Business and Item 1a - Risk Factors or search the 10-K report with the terms patents or intellectual property. If you need to read the actual patent document use one of the websites listed below: