On Porter's five forces, why is new entrant a separate bucket?

Hi!

It refers to the relevance of barriers to entry in the specific industry.

You might also include it in your “Competition” bucket if you can structure the problem and illustrate your approach well to the interviewer.

Best,

Anto

The exact answer to that question can only be provided by Porter himself. We can only speculate.

Having said that - another way to think of this force is as “barriers to entry”. If the barriers are low, there will be a constant flux of new players coming and constantly disrupting the competitive landscape. With a higher barrier, there is a lower flux and the competition can develop in a more mature and less reactive manner.

Hi there,

Because they're different!

Assessing current competition and how well we can beat them is totally different to assessing the threat of new entrants.

Maybe we can beat competition today easily, but if others can come in easily, what's the point?

Think Uber and Lyft. They beat Taxis (competition) pretty handily didn't they?

What happened? Via, Didi, Ola, and even Taxi companies came into the market quickly…why? Because all it took was an app to compete! (Note, they've now managed to build up high barriers to entry through economies of scale, but that took time)

We might be able invade a city that's poorly defended, but if more invaders are on the way and we don't have a big moat/high walls, we won't be able to keep the city!