What does the threat of new entrants measure in the context of Porter's five industry forces?

The threat of new entrants in the context of Porter's five industry forces specifically assesses how the barriers to entry impact the ability of new competitors to enter an industry. When these barriers are low, it is easier for new companies to enter the market, which increases competition and potentially affects the profitability of existing firms. Barriers to entry can include factors such as economies of scale, brand loyalty, capital requirements, regulatory requirements, and access to distribution channels. High barriers deter new entrants, which protects the market share and profitability of established players.

This understanding is critical because it highlights how the competitive landscape can shift with the entrance of new firms, influencing strategies that existing companies must adopt to maintain their market position. Other options focus on different aspects of competition and market dynamics but do not directly capture the definition of the threat of new entrants within Porter's framework.