What is Porter's Five Forces?
Porter's Five Forces is a definitive analytical model designed to assess the competitive intensity and underlying profitability of an industry. Instead of just looking at direct competitors, it forces you to analyze the structural balance of power involving suppliers, buyers, new entrants, and substitutes.
- Best for
- Market Analysis & Strategic Positioning
- Time
- 45–60 mins
- Who joins
- Leadership & Strategy Teams
- You leave with
- A structural map of industry profitability and strategic leverage points.
When to use Porter's Five Forces
Use this framework before entering a new market, evaluating a major pivot, or attempting to understand why profit margins are structurally compressed despite strong operational execution.
How to run Porter's Five Forces
Examine the five forces individually. Start with the core 'Competitive Rivalry' in the center. Then assess 'Threat of New Entrants' (barriers to entry), 'Threat of Substitutes' (alternative solutions), 'Supplier Power' (leverage over inputs), and 'Buyer Power' (leverage over prices). Focus on structural economics, not temporary trends.
Questions to ask in each section
01Competitive Rivalry
- Are competitors competing primarily on price, or are they differentiating on value?
- Is the industry growth rate stagnant, leading to zero-sum market share battles?
02Threat of New Entrants
- What structural barriers (capital, regulation, network effects) prevent startups from stealing share?
- Do incumbents have significant cost advantages independent of scale?
03Threat of Substitutes
- What completely different products or services solve the same underlying customer problem?
- Is the price-performance tradeoff of substitutes improving rapidly enough to threaten our core business?
04Supplier Power
- How dependent are we on a single supplier for critical inputs or infrastructure?
- Do suppliers possess credible threats of forward integration into our market?
05Buyer Power
- How concentrated are our buyers? (e.g., does a single customer account for >10% of revenue?)
- Are the switching costs for buyers low enough to give them immense negotiating leverage?
Worked examples
SaaS CRM Startup
Evaluating the CRM software industry.
- Intense competition with dominant players like Salesforce and HubSpot.
- High marketing spend required to capture attention.
- Low technical barriers to build basic software, but high barriers to match enterprise security requirements.
- High customer acquisition costs act as a deterrent.
- Spreadsheets (Excel/Google Sheets) for small businesses.
- Vertical-specific software with built-in CRM features.
- Low power from basic cloud providers (AWS/GCP) due to commoditization.
- High power from key integration partners or API providers (e.g., Google Workspace).
- Low power for SMB buyers due to fragmentation.
- High power for Enterprise buyers demanding custom terms and massive discounts.
Let Tedi run the session
Traditional industry analyses quickly become outdated slide decks. A Five Forces map earns its keep when it changes a decision, such as whether to enter a market or how to reposition. When it raises one, pick one of Tedi's live sessions: Tedi runs the discussion, challenges assumptions and writes up the decisions, owners and next steps.
Choose a live session