Steps to undertake 5 forces analysis:

1. Define: Define the relevant industry by both its product scope and geographic scope. Its useful to cite the relevant NAICS (The North American Industry Classification System) Code. As you search the various databases, be sure to check the code and apply a consistent industry definition that corresponds to the NAICS code. This will help you specifically place rivals and substitutes.
2. Identify: Identify the players constituting each of the five forces; where appropriate, segment them into groups.
3. Assess: Assess the underlying drivers of each force. Which are strong? Which are weak? Why? Further, it is also important to step back and assess the overall industry structure. Which forces control profitability? Which firms are substantially more profitable than industry averages? Why?
   1. 1. Threat of new entrants: The greater the threat of new entrants into the industry (i.e. the lower the entry barriers to get into the industry) the higher the likelihood that new entrants will enter to capture profits, the lower the profitability of the industry. The threat of new entrants increases with the following (illustrative):
   2. • • Low economies of scale within the industry
        • Low product differentiation and/or brand equity
        • Low capital requirements
        • Low switching costs for buyers
        • Easy access to distribution channels
        • No government policy restricting industry
        • Easy access to necessary inputs
        • Limited learning curve benefits for incumbents
        • Limited expected retaliation from incumbents
        • Limited patent and trademark protection
      • B. Threat of substitutes: The greater the threat of substitute products, the higher the likelihood that buyers will switch their preferences if the price of industry products gets too high, the lower the profitability of the industry. The threat of substitutes increases with the following (illustrative):
      • • • Low switching costs
          • High buyer inclination to substitute
          • Low price performance trade-off
          • Easy ability to substitute
        • C. Threat (bargaining power) of buyers: The greater the negotiating power of buyers, the more influence they have on negotiating lower prices and, hence, depress profits in the industry. The bargaining power of buyers increases with the following (illustrative):
        • • High buyer volumes
          • Low buyer switching costs
          • Increased information available to buyers
          • High seller dependence on buyers (i.e. seller dependence on a few customers)
          • High threat of backward integration by buyers
          • Low levels of product differentiation
          • Substitute products available to buyers
        • D. Threat (bargaining power) of suppliers: The greater the negotiating power of suppliers, the more influence they have to increase prices and extract profits, the lower the profitability of the industry. The bargaining power of suppliers increases with the following (illustrative):
        • • High supplier concentration (i.e. few suppliers)
          • High differentiation of inputs
          • High switching costs to different suppliers
          • Lack of substitute inputs
          • High threats of forward integration by suppliers
          • Cost relative to total purchases
        • E. Threat (intensity) of rivalry: The higher the level of rivalry among competitors in the industry, the more they will be forced to lower prices or provide extra value to continue to attract customers, the lower the overall profitability of the industry. The intensity of rivalry increases with the following (illustrative):
        • • High exit barriers in the industry
          • Low levels of industry concentration
          • High fixed costs to operate
          • Low industry growth
          • Overcapacity in the industry
          • Low product differences
          • Low switching costs for buyers
4. Analyze: Analyze recent and likely future changes for each force. How are they trending? What might happen in the future?
5. Interpret and conclude: How can a firm position itself in relation to the five forces? Is there a position where the forces are weakest? Is it possible to exploit industry change? Can the industry be reshaped to favor a firm?

Industry analysis for the athletic apparel manufacturing (NAICS: 315990)

force	Strength Force (Hight, Med, Low)	Support & Substantiation
Threat of new entrants		Barriers to entry? 1. 2. 3. 4. 5. explanation regarding strength of N.E:
Threat of substitutes		typical substitutes for this industry: 1. 2. 3. 4. 5. explanation regarding strength of substitutes:
Threat (bargaining power) of buyers		Typical buyers? Explanation regarding strength of substitutes:
Threat of (bargaining power) of suppliers		typical suppliers? Explanation regarding the strength of suppliers?
Threat (intensity) of rivalry)		Who are the main firms within this industry? 1. 2. 3. 4. 5. Basis of competition: 1. 2. 3. 4. 5. Explanation regarding the strength of rivalry?

Narrative interpreting the template Summary of key findings from the template