A well$-$known model that helps managers focus on the five most important competitive forces, or potential threats, in the external environment is Michael Porter's five forces model. Porter identified five factors as major threats because they affect how much profit organizations competing within the same industry can expect to make. It is important for all managers to be able to analyze the effects of the forces when making decisions about entering, exiting, or staying in a given industry.

When you have completed this exercise, you should be able to understand the basic elements of Michael Porter$$s five forces model and perform a basic five forces analysis.