Framework
Porter's Five Forces
Assess industry attractiveness through five competitive pressures.
Summary
Porter's Five Forces analyzes the structural forces shaping competition in an industry: rivalry, supplier power, buyer power, threat of substitutes, and threat of new entrants.
History
Introduced by Michael Porter in his 1979 Harvard Business Review article and 1980 book Competitive Strategy.
How it works
- Define the industry boundary clearly.
- Score each force as low, medium, or high.
- Identify which force most constrains profitability.
- Decide where to position to soften that force.
Advantages
- Structural, not anecdotal
- Stable over time
- Forces honest industry view
Limitations
- Industry boundaries can be fuzzy
- Underweights complementors and platforms
Examples
- - Airlines as a high-rivalry, high-supplier-power industry
- - Pharma's high entry barriers
Implementation guide
- - Run annually with leadership
- - Pair with PESTEL for macro forces
Porter's Five Forces - FAQ
- Is Five Forces still relevant?
- Yes, with care. Add complementors and ecosystem effects to keep it current.
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