"Harvard Business School professor Michael Porter created the "Five Forces" framework in 1979, and it still stands as a brilliant way to grasp a given industry's big picture. Note that it's a way to characterize an industry, not an individual company. So, for example, the first force, "threat of new entrants," means, "Is this an industry in which new entrant companies could easily compete, or not?""
"Force One: Threat of new entrants. Chandrasekaran sees the industry becoming "a three-horse race" with OpenAI, Google, and Anthropic; he can't see how a new company could "be on a par with these three." Dai sees formidable barriers to new entrants in "compute cost, talent scarcity, and regulatory complexity." Conclusion: This force is weak which bodes well for the incumbents. Google may be better positioned than OpenAI given how much more of the AI value chain it controls."
Porter's Five Forces frames industry-level dynamics rather than firm-level performance. The threat of new entrants is weak because high compute costs, scarce talent, and regulatory complexity limit the ability of new companies to compete. Analysts foresee a concentrated competitive landscape dominated by OpenAI, Google, and Anthropic. Supplier bargaining power is strong due to a small number of firms producing the best chips and constrained cloud capacity, while data providers are increasingly seeking compensation. Vertical control over chips, cloud, and data gives larger incumbents a defensive advantage against both supplier pressures and potential new entrants.
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