From MindTools
Gain a clearer picture of what drives competition in your industry – and how to position your business for success.
When you’re running a business, it’s not enough to have a great product or service. You also need to understand the market forces at play – and how they affect your ability to grow and stay profitable. That’s where Porter’s Five Forces can help.
Developed by Harvard professor Michael E. Porter, this powerful tool helps you analyze five key forces that shape every industry. Whether you’re planning a new venture, entering a new market, or refining your strategy, using this model can help you make informed decisions and stay competitive.
What Are the Five Forces?
Porter’s model identifies five forces that influence your competitive environment:
- Competitive Rivalry – Who are your direct competitors, and how intense is the competition in your industry?
- Threat of New Entrants – How easy is it for new businesses to enter your market and challenge your position?
- Bargaining Power of Suppliers – How much influence do your suppliers have over prices, quality, or availability?
- Bargaining Power of Customers – Can your customers demand lower prices, better service, or switch easily to a competitor?
- Threat of Substitute Products or Services – Are there alternatives that customers might choose over your offering?
By analyzing these forces, you can spot risks, uncover opportunities, and develop strategies to strengthen your market position.
Why It Matters
- Make smarter decisions about pricing, partnerships, and market entry.
- Identify industry trends that could affect your business over time.
- Build a sustainable competitive edge by understanding what drives profitability in your sector.
Ready to Dive In?
Explore the full MindTools article to see real-world examples, access templates, and learn how to apply each force to your business.