Porter's five force model is most reliabletool for systematically diagnosing the significant competitive pressures in a market. The model holds that the state of competition in an industry is a composite of competitive pressures operating in five areas of the overall market:

Threat of new entrants: New entrants with their extra capacity and new product range bring new competitive pressures.

Bargaining power of customers: The bargaining power of the buyers influences not only the prices that the producer can charge but also influences costs and investments.

Bargaining power of suppliers: The bargaining power of suppliers determines the cost of raw materials and other inputs of the industry.

Rivalry among current players: Rivalry or competition leads to actions taken by different players to get an edge over other players.

Threats from substitutes: Substitute products are a latent source of competition in an industry. Substitute products offering a price advantage and/or performance improvement to the consumer can drastically alter the competitive character of an industry.