First in Porter’s Five Forces is
the Threat of new entrants, Think about how profitable your industry is,
industries that have high returns will attract lots of new firms wanting to get
a piece of the pie. Theses new entrants will eventually decrease your profitability,
unless you can make entry of the new firms more difficult. Because your
industry can be affected by other firms entering the market it is important to
know how easy it is for others to get a foothold into the industry, how much
would it cost? Is the industry highly regulated?
If it takes little money and effort to enter your market and
compete effectively, or if you have little protection for your key technologies,
then rivals can quickly enter your market and weaken your position. If you have
strong and durable barriers to entry, then you can preserve a favorable
position and take fair advantage of it.