Guide to
Business
Planning
Porter’s five forces
The Five Forces were Porter’s
conclusions on the reasons for
differing levels of competition, and
hence profitability, in differing
industries. They are empirically
derived, i.e. by observation of real
companies in real markets, rather
than the result of economic
analysis.
Porter’s Five Forces model is a
useful generic structure for
thinking about the nature of
industries. The definition of an
industry is as follows: “The group
of firms producing products that
are close substitutes for each
other” Michael Porter – Competitive
Strategy
Threat of
New Entrants
Rivalry Among
Existing Firms
Power of
Customers
Power of
Suppliers
Threat of
Substitutes
The strength of the five forces will determine the level of
profit within an industry that a competitor can expect to make
© Guide to Business Planning