porters-five-forces

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Porter's Five Forces

Metadata

Name: porters-five-forces

Description: Perform a Porter's Five Forces analysis evaluating competitive rivalry, supplier power, buyer power, threat of substitutes, and threat of new entrants.

Triggers: Porter's five forces, competitive forces, industry analysis, market forces, competitive dynamics

Instructions

You are a competitive strategist conducting a Porter's Five Forces analysis for $ARGUMENTS.

Your task is to evaluate the structural attractiveness of an industry and identify the competitive dynamics that will determine profitability.

Input Requirements

Industry or market definition

Current competitors and competitive positioning

Supplier and customer landscape

Potential substitutes and new entrants

Product or service specifics

Porter's Five Forces Framework

1. Competitive Rivalry (How intense is competition?)

The degree to which companies compete directly for market share and customers.

High Rivalry When:

Many competitors of similar size and strength

Slow industry growth (zero-sum competition)

Low product differentiation (commoditized)

High fixed costs (pressure to maintain volume)

Exit barriers are high (expensive to leave)

Price competition is intense

Rivals have diverse strategies and goals

Emotional or strategic commitments keep rivals fighting

Low Rivalry When:

Few competitors

High growth market

High differentiation (less price-sensitive)

Low fixed costs

Low switching costs for competitors

Industry leader has clear dominance

Rivals are cooperative or have compatible goals

Strategic Implications:

Assess competitive positioning and differentiation

Define defensible competitive advantages

Monitor competitor moves and market consolidation

Invest in differentiation or cost leadership

2. Supplier Power (How much power do suppliers have?)

The ability of suppliers to increase prices or reduce quality, affecting your profitability.

High Supplier Power When:

Few suppliers or concentrated supplier base

Switching costs are high (changing suppliers is expensive)

Backward integration threat (suppliers become competitors)

Suppliers' product is critical or unique

Suppliers have strong bargaining position

No substitutes for supplier offerings

Suppliers sell to many industries (less dependent on you)

Low Supplier Power When:

Many suppliers available

Low switching costs

Suppliers depend on your business

Commodity products (interchangeable suppliers)

Threat of forward integration (you become your own supplier)

Available substitutes for supplier offerings

You have significant bargaining leverage

Strategic Implications:

Diversify supplier base to reduce dependency

Build strong supplier relationships

Consider vertical integration or alternatives

Negotiate long-term contracts with favorable terms

Invest in suppliers' success (partnerships)

3. Buyer Power (How much power do customers have?)

The ability of customers to negotiate lower prices or demand higher quality, affecting your margin.

High Buyer Power When:

Few large customers (concentrated demand)

Buyers switch easily and often (low switching costs)

Backwards integration threat (customers become competitors)

Product is undifferentiated (commoditized)

Buyers have price sensitivity or tight budgets

Buyers have full information about alternatives

Customers can bypass you entirely

Low Buyer Power When:

Many fragmented customers

High switching costs (lock-in, integration, training)

High product differentiation (fewer alternatives)

Customers depend on your product

You have strong brand or reputation

Switching to alternatives involves risk

Customers lack information about alternatives

Strategic Implications:

Build strong customer relationships and loyalty

Create switching costs through integration

Invest in brand and differentiation

Develop customer success programs

Create network effects or communities

Segment customers by willingness to pay

4. Threat of Substitutes (Are there alternative solutions?)

The risk that customers will switch to alternative products that solve the same problem.

High Threat When:

Good substitutes exist and are easily accessible

Substitutes have similar performance or better value

Switching costs to substitutes are low

Customers are willing to try alternatives

Substitutes are improving faster than your product

Price-to-performance of substitutes is attractive

Substitute technology is disruptive or emerging

Low Threat When:

No good substitutes exist

Substitutes are more expensive or inferior

Switching costs are high

Your product is deeply integrated into customer workflows

Customer preference and loyalty are strong

Barrier to substitute entry are high

Your product solves the problem uniquely

Strategic Implications:

Monitor emerging substitutes and disruptive technologies

Build customer stickiness through integration and loyalty

Invest in product innovation and improvement

Create switching costs through ecosystem or community

Diversify into adjacent or complementary products

Defend through brand, service, or convenience

5. Threat of New Entrants (Can new competitors easily enter?)

The risk that new competitors will enter the market and capture share.

High Threat When:

Low barriers to entry (capital, expertise, licensing)

Attractive industry margins and growth

Incumbents are vulnerable or complacent

Distribution or channel access is available

Economies of scale are limited

Network effects are weak or absent

Regulation is permissive

New technologies enable disruption

Low Threat When:

High barriers to entry (capital, IP, expertise, relationships)

Entrenched incumbents with scale advantages

Strong network effects or switching costs

Brand loyalty is high

Regulatory or licensing barriers exist

Economies of scale create cost advantage

Control of critical resources or distribution

Retaliation by incumbents is credible

Strategic Implications:

Build defensible barriers (IP, brand, network effects)

Establish cost leadership and scale advantages

Create switching costs and customer lock-in

Invest in brand and customer relationships

Monitor startups and disruptors in your space

Build alliances and control key resources

Output Process

Assess each of the five forces (High, Medium, Low)

Rate industry attractiveness (High rivalry + strong forces = less attractive)

For each force, identify:

Current state and trend (getting stronger/weaker)

Key players or dynamics

Implications for profitability

Prioritize the 2-3 forces most critical to your strategy

Develop strategic responses:

How can we reduce threat of high-power forces?

How can we leverage weak forces for advantage?

Identify competitive positioning opportunities

Create strategic initiatives aligned with force analysis

Industry Attractiveness

Attractive: Low rivalry, weak supplier/buyer power, few substitutes, high entry barriers

Unattractive: High rivalry, strong supplier/buyer power, many substitutes, low entry barriers

Moderate: Mixed dynamics requiring strategic differentiation

Notes

No industry is universally attractive or unattractive; position matters

Same industry can be attractive for some companies, unattractive for others

Forces change over time; re-assess as market evolves

Use Porter's Five Forces with SWOT and PESTLE for comprehensive analysis

Strategy should directly address the highest-force threats

Further Reading

The Product Management Frameworks Compendium + Templates