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LESSON 3. STRATEGY ANALYSIS
D A P2 3 7:S T R A T E G I CA N D

C O N T I N G E N C YM A N A G E M E N T

PortersFiveForcesModelof

Competition

StrategicgroupswithinIndustries

O R T E Z A,C H R I S T O P H E RJ O H NV.
D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t
I.Porter'sFiveforcesModelofCompetition

II.AlternativestoPorter'sFiveforcesModelofCompetition

III.StrategicgroupswithinIndustries

OUTLINE OF TOPICS

WHAT WE'LL DISCUSS
I.MICHAEL E. PORTER'S
FIVE FORCES MODEL
Porter'sFiveForceswasoriginallydevelopedbyHarvard
BusinessSchool'sMichaelE.Porterin1979.

ThemodelwaspublishedinMichaelE.Porter'sbook,

"CompetitiveStrategy:TechniquesforAnalyzingIndustries

andCompetitors"in1980.

Sinceitspublicationin1979,ithasbecomeoneofthe

mostpopularandhighlyregardedbusinessstrategytools.

Porterrecognizedthatorganizationslikelykeepaclose

watchontheirrivals,butheencouragedthemtolook

beyondtheactionsoftheircompetitorsandexaminewhat

otherfactorscouldimpactthebusinessenvironment.

MICHAEL E. PORTER

PORTER'S FIVE FORCES MODEL

D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t
M I C H A E LE.P O R T E R
"Understandingthecompetitive

forces,andtheirunderlying

causesrevealstherootsofan

industry'scurrentprofitability

whileprovidingaframeworkfor

anticipatingandinfluencing

competition(andprofitability)

overtime,"
Porter's Five Forcesisasimplebut
powerfultoolforunderstandingthe

competitivenessofyourbusiness

environment,andforidentifyingyour

strategy'spotentialprofitability.

Thefiveforcesmodellooksatfivespecific

factorsthatdeterminewhetherornota

businesscanbeprofitableinrelationto

otherbusinessesintheindustry.

buyer

power

supplier

power

threat of

new entry

threat of

substitution

competitive

rivalry

D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t
L O O K SA TT H E
I N D U S T R Y'SE C O N O M Y

A SW H O L E

MACRO TOOL IN

BUSINESS

ANALYTICS

Inordertounderstandwhereyourcompanyorbusinessfitsintheindustry

landscape,Porter'sFiveForcesshouldbeusedinconjunctionwithaSWOT

analysis.

IN RELATION TO SWOT ANALYSIS

F O C U SO NAS P E C I F I C

C O M P A N Y'SD A T A

A N DA N A L Y S I S

MICRO

ANALYTICAL

TOOL
PORTER'S FIVE FORCES
MODEL

CompetitiveRivalry

Threatofnewentry

BuyerPower

SupplierPower

Threatofsubstitution

D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t

buyer

power

supplier

power

threat of

new entry

threat of

substitution

competitive

rivalry

Porter'sFiveForcesisabusinessanalysis

modelthatidentifiesandanalyzesfive

competitiveforcesthatshapeeveryindustry

andhelpsdetermineanindustry'sweaknesses

andstrengths.

Thismodelhelpsinexplainingwhyvarious

industriesareabletosustaindifferentlevels

ofprofitability.

Porter'smodelcanbeappliedto

anysegmentoftheeconomytounderstand

thelevelofcompetitionwithintheindustry

andenhanceacompany'slong-term

profitability
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