Strategy and analysis
Porter's Five Forces
Rank the competitive forces shaping your market — rivalry, supplier power, buyer power, substitutes, and new entrants.
What the framework is
Porter's Five Forces explains how much profit a market leaves for the businesses in it. It looks at five pressures:
- Competitive Rivalry: rivalry between existing competitors;
- Threat of New Entry: the threat of new entrants;
- Threat of Substitution: the threat of substitutes;
- Buyer Power: the bargaining power of buyers;
- Supplier Power: the bargaining power of suppliers.
Michael Porter set it out in 1979. It remains the standard way to judge whether a market is worth entering or defending.
What the result looks like
Competitive Rivalry
Win rate
01
Price competition
83%
20 Wins · 4 Losses
02
Similar products
42%
10 Wins · 14 Losses
03
Aggressive marketing
25%
6 Wins · 18 Losses
Supplier Power
Win rate
01
Few component makers
71%
17 Wins · 7 Losses
02
Rising material costs
50%
12 Wins · 12 Losses
03
Long contracts
29%
7 Wins · 17 Losses
Buyer Power
Win rate
01
Large retail buyers
63%
15 Wins · 9 Losses
02
Easy switching
54%
13 Wins · 11 Losses
03
Price comparison sites
33%
8 Wins · 16 Losses
Threat of Substitution
Win rate
01
DIY alternatives
79%
19 Wins · 5 Losses
02
Subscription services
46%
11 Wins · 13 Losses
03
Second-hand market
25%
6 Wins · 18 Losses
Threat of New Entry
Win rate
01
Low start-up costs
67%
16 Wins · 8 Losses
02
Foreign entrants
58%
14 Wins · 10 Losses
03
Platform players
25%
6 Wins · 18 Losses
When it earns its place
Use it before entering a market, when writing a business plan, or when margins are shrinking and nobody agrees why. It describes a market, not your organisation. For your own strengths and weaknesses, follow it with a SWOT.
The trap is listing every factor under every force, so the analysis says everything matters equally.
How to run it with a group
- Name the market precisely. "Craft beer in NRW" gives sharper answers than "drinks".
- List three to six factors under each force.
- Participants work through the forces one at a time. In each, they compare factors two at a time. Participants do not need an account to respond.
- Invite people who see the market from different sides: sales, purchasing, and anyone close to customers.
- Take the top factor from each force. Together they show where the pressure on your margin really comes from.