Porter on “The Five Competitive Forces that Shape Strategy”
The Classic Five Competitive Forces Framework Backgrounder
Need to update the competitive analysis of your industry? Check out the Harvard Business Video IdeaCast interview with Michael Porter on “The Five Competitive Forces That Shape Strategy.” Porter provides a review of his classic five forces framework:
- Threat of new entrants
- Bargaining power of buyers
- Threat of substitute products or services
- Bargaining power of suppliers
- Rivalry among existing competitors
In exploring the implications of the five forces framework, industry analysis provides insight into what’s causing profitability, the trends in the industry most likely to be significant in shaping the industry, and what are the constraints on the industry.
The Five Forces Revisited
Porter’s new article “The Five Competitive Forces That Shape Strategy” details:
- Why a fast-growing industry is not always a profitable one
- How eliminating today’s competitors through mergers and acquisitions can reduce an industry’s profit potential
- How government policies play a role by changing the relative strength of the forces, and how to use the forces to understand complements
- How a company can influence the key forces in its industry to create a more favorable structure for itself or to expand the pie altogether.
Starting a Competitive Analysis
Using the airline industry, Porter applies his five forces framework to explain why “sexiness” of an industry isn’t always profitable. Need to start a competitive analysis? Start with an industry analysis, based on Porter’s five forces framework to understanding industry structure. After compiling analysis, review for implications of your analysis to reshape the nature of the industry. The five forces reveal why industry profitability is what it is.
Recommended Reading List
- The Five Competitive Forces That Shape Strategy
by Michael E. Porter
- On Competition, Updated and Expanded Edition
by Michael E. Porter
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