1. Analyze Rivalry Among Existing Competitors
Intense competition for market share can limit a company’s profits when diversifying into a new industry. Consider these questions as you describe the rivalry in your company’s existing industry.
 How many competitors currently supply engines for the automotive manufacturing industry?
 What is each competitor’s position? How much of the market share has each one captured?
 Do these companies compete intensely in the automotive industry? If so, do they engage in rivalry and lower prices to gain market share?
 Do companies compete to provide additional services or constant innovation?
2. Analyze Threats of New Entrants to the Market
Analyze whether it is easy or hard for new companies to begin supplying engines to the automotive manufacturing industry and explain your findings. Be sure to consider these questions:
 What barriers do companies face when beginning to supply engines to the automotive manufacturing industry?
 Are there many regulations or legal barriers?
 Are there high costs associated with gaining the expertise necessary to produce goods or provide services for the market?
 How many companies are prepared to enter the automotive industry?
3. Analyze the Bargaining Power of Suppliers
Evaluate how much power the suppliers of raw materials might have to drive up prices. Be sure to answer these questions:
 Which companies provide the raw materials for your product?
 Are there many suppliers, or only a few?
 Does rivalry between the suppliers drive down the price of some of the raw materials?
 Is a virtual monopoly on some of the raw materials by a single supplier likely to drive up the price of raw materials?
 Overall, how will the bargaining power of suppliers affect the cost and ease of obtaining the materials necessary to sell in the automotive industry?
4. Analyze the Threat of Substitute Products
Assess the threat of substitute products in the auto industry. Be sure to answer the following questions:
 Are other products emerging in this industry that might compete with existing products?
 What are these possible competing products?
 Are these possible competing products cheaper to produce than the industry’s current products?
 Are these possible competing products better in other ways?
 Could these possible competing products force your company out of the market?
5. Analyze the Bargaining Power of Buyers
The fewer the buyers, the more pressure they may be able to put on your company to sell products and services for less. Consider these questions as you evaluate the bargaining power of buyers:
 How many different companies or consumer groups buy the engines your company currently builds for the automotive manufacturing industry?
 If there are only a few customers, are they able to push to lower the price of the products?
 If there are many customers, are there any organizations that enable the customers to band together and apply pressure to reduce the costs of your products?

6. Summarize each of the five forces you described on this page in just one sentence per force. Be sure to assess the effect of each force as low, medium, or high in your summary.
• Rivalry Among Existing Competitors
• Threats of New Entrants
• Bargaining Power of Suppliers
• Threat of Substitute Products
• Bargaining Power of Buyers