Developed by Michael E. Porter (How Competitive Forces Shape Strategy, 1979).
Rates an industry's rivalry, entry threat, substitutes, supplier power, and buyer power to show where competitive pressure comes from and how much profit the structure allows.
When to reach for it
When deciding whether a market is worth entering or defending, or where a strategy should push back on the forces squeezing margins.
How it runs
- Draw the industry boundary wide enough to include substitutes.
- Assess rivalry among current competitors.
- Assess the threat from new entrants and from substitutes.
- Assess the bargaining power of suppliers and of buyers.
- Judge which forces are strongest and where value is captured.
- Decide which forces to counter, sidestep, or turn to advantage.
Where it sits in SOLVE eX
Go to the source
- How Competitive Forces Shape Strategy, Harvard Business Review, March to April 1979, 1979