What is Porter's Five Forces and what does it assess?

• A. It analyzes only internal capabilities to improve efficiencies.
• B. It assesses competitive forces: threat of new entrants, bargaining power of suppliers and buyers, rivalry among existing firms, and threat of substitutes; assesses industry attractiveness.
• C. It measures employee engagement and retention.
• D. It outlines marketing mix elements to optimize product launch.

Answer: (B)

Porter's Five Forces is a framework for evaluating how competitive pressures shape an industry's profitability. It looks at five forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and rivalry among existing firms. By judging how strong each force is, you can assess the overall attractiveness of the industry and its potential for sustained profitability, which helps inform strategic moves like creating barriers to entry, differentiating offerings, or securing favorable supplier and customer terms. The other options miss the point because this framework focuses on external competitive forces and industry structure, not internal capabilities, employee metrics, or marketing mix elements.