Porter's Five Forces Analysis is a framework for industry analysis and business strategy development. It induces the economics of the industrial organization to develop five forces that determine the competitive intensity and therefore the attractiveness of a market. Attractiveness in this context refers to the overall profitability of the industry. An unattractive industry is one in which the combination of these five forces acts to reduce overall profitability. A very unattractive industry would be one approaching pure competition, in which the profits available to all firms are brought to normal profit. This analysis is associated with its main innovator Michael E. Porter currently at Harvard University since 2014. Porter's five forces considered together can help you determine whether a company has an economic moat. The framework is particularly useful for examining a firm's external competitive environment. After all, if a company's competitors are weak, it may not need a big moat to keep them at bay. Likewise, if a company operates in a cutthroat industry, it may need a much wider moat to defend its profits. The concept of the five forces is perhaps best explained through an example. Buyer power. Consumer product companies face weak purchasing power because customers are fragmented and have little influence on price or product. But if we consider that buyers of consumer products are retailers and not individuals, then these companies face very strong purchasing power. Retailers like CoolBlog are able to negotiate prices with companies like Chatime because they buy and sell their products at an affordable price. Supplier power. Most likely, consumer product companies face some supplier power simply because of the costs they incur. ....middle of paper......other than that, the threat of substitutes. With so many quick-service beverage companies, low switching costs, similar products, and healthier options, the risk of substitutes is very high. The success of one product also leads to the creation of other products that can perform the same functions as the product from the same industry. Porter also states that if an industry wishes to follow suit, producing products with similar functions, attention should be given to products that enjoy consistent price performance that comes close to the industry's product. Secondly, this would result in minimal switching costs for the buyer. Finally they are produced by the industry which obtains high profits. Porter suggests that through advertising, improving product quality, marketing, research and development, and product distribution, an industry can improve its collective relative to the substitute..