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Porter's Five Forces Template for Accurate Analysis
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How To Perform Porter’s Five Forces Analysis [+Template]

Understand your business's competitive environment and see how much market share you can take with this Porter's Five Forces template.
Michael E. Porter's Five Forces of competition are a staple of business classes the world over and, when used correctly, can have you feeling like you're looking into the future with a crystal ball.

How it feels to
chew five gum
use the Porter's Five Forces template.

But performing a Five Forces analysis can be an in-depth, time-intensive process. So, we put together this document you can clone and use as Porter's Five Forces template you can use to collaboratively create and share your own analysis.

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What is Porter's Five Forces analysis?
Porter's Five Forces analysis is a model for assessing the intensity of competition within an industry. The core idea of the Five Forces model is that competition isn't just driven by direct competitors but also the underlying economic forces that influence the power of suppliers, the power of consumers, the threat of substitutes, and the likelihood of new competitors emerging.

In his
, Porter defines the Five Forces as:
The bargaining power of suppliers
The bargaining power of buyers
The threat of new entrants
The threat of substitutes
Current competitors jockeying for position

The process of performing a Five Forces analysis is to first define the influence of each of these forces on your industry, then identify where your business fits within this interplay of forces. In doing so, you can start to form a strategy to adapt to and succeed within your industry's competitive landscape. One important caveat is that the Five Forces analysis is used to analyze entire industries and markets, which you can then use to inform decisions at your business. As
, one of the most common mistakes of using the Five Forces is by solely focusing on your business or a handful of competitors.

If all Five Forces are weak, the industry has a huge profit potential since it's essentially "untapped." If any of the Five Forces are strong, that strong force will enforce a cap on potential for profit within that industry. Let's get into what these forces actually are.

What are the Five Forces?
Porter's Five Forces model is specific about which economic forces most influence an industry's competitive environment.

1. Bargaining power of suppliers.
Suppliers exert a lot of influence on an industry's profitability. If there are only two companies you can buy a specific material from, they can charge pretty much what they want. You need that material to make your product, and they have it. This power reverberates down the supply chain as your product's price reflects the price of its components.

The reverse is true as well. If there are dozens of suppliers for your key material, they'll compete to win your business. You'll end up paying less, and you can then charge less for your product later on down the line.

For example, say you're a smartphone manufacturer named Blokia whose main differentiator is making unbreakable phones. To do so, you need a specific type of very strong touchscreens that only two manufacturers make at the scale you need. Their power on your business (and your product) is very high because you can't go anywhere else. If you want to make and sell your unbreakable phones, you need to pay their prices to do so.

2. Bargaining power of buyers.
Consumers also exert a lot of influence on competition within an industry. When consumers have a lot of options, and it's easy for them to switch between those options, they have a
lot
of power. But, when there are only a few options, and it's difficult for them to switch between these options (a.k.a. lock-in), consumers have less power.

As the head of product at Blokia, you might
and not be too worried about the bargaining power of your customers. For customers looking for an unbreakable phone, you're the only option. On top of that, switching phones is generally a pain in the butt, so once they've bought your phone, they're unlikely to switch.

3. The threat of substitute products.
If the Information Age has taught us anything, it's that industries are always
. One of the scarier competitive forces is the threat of a totally new product that solves the same needs your product does. One recent example is the rise of Zoom and virtual conferences taking the place of in-person corporate events during the COVID-19 epidemic.

In our Blokia example, maybe a newfangled brain implant eliminates the need for phones altogether as everyone can now communicate telepathically. No one needs an unbreakable phone if they don't need a phone in the first place. This is a bit of an outlandish example, but if you're a product manager in real life, you can use systems like
to prioritize features and stay ahead of the competition and potential substitutes.

4. The threat of new entrants.
In the same vein as industry disruption is the emergence of new competitors. More specifically, this force is about how easy it is for new competitors to enter the market. The higher the barrier of entry, the more secure your position is. This barrier of entry is controlled by a lot of factors but includes economies of scale, government restrictions, branding, and advertising reach, and access to distribution channels (i.e., can you deliver the product?).

The barrier of entry for unbreakable phones is pretty high for Blokia. Not only is the up-front cost of making these phones super expensive, but there are also likely patents involved with the manufacturing process. A new competitor would have to come up with their own unique manufacturing process, have the capital to scale that process and break through the crowded smartphone advertising and branding market.

5. The competitive rivalry.
The most straightforward of the Five Forces is the competitive rivalries, where similar companies with similar products compete for market share. Before Porter defined the four other competitive forces, the competitive analysis process focused almost completely here on this force. Put simply, the competitive rivalry force is how differentiated (perceived or otherwise) each product is. Pepsi and Coke are both similar colas, but their branding is how they differentiate and compete.

Note: You could use a
as a part of exploring the power of the competitive rivalry force.

Blokia might compete directly with Blamsung's line of durable phones, for example. How they compete might come down to pricing and branding. As the head of product at Blokia, you may push for messaging all about quality. You're the only smartphone company whose sole focus is durability. For Blamsung, it's just another product line.

Why you should use Porter's Five Forces model for your business.
Porter's Five Forces is one of
the
go-to analyses for corporate strategy. Porter himself has gone on to use this model to advise the largest corporation
and nations
in the world. It's a big deal, but there are three immediate benefits to running a Five Forces analysis.

Estimate business profitability.
The point of performing a Five Forces analysis is to understand the current competitive landscape of your industry. In doing so, you can estimate how much of it is there for the taking. If you think of the industry as a pie, Five Forces helps you understand how big of a slice you can get. You might not have that big of a slice right now, but through the analysis, you can prove to yourself and others that you're on your way to claiming that larger slice.

Scale smartly.
A big part of scaling is understanding your limits. If you try to scale without taking into account the power your suppliers have over your end product, you could quickly run out of money. This perspective in scalability can factor heavily into decisions around
and brand positioning.

Refine go-to-market strategy.
Porter starts
by introducing the Five Forces with this axiom: "The essence of strategy formulation is coping with competition." You cannot create an effective go-to-market strategy without first understanding the full extent and nuances of your competition.

Bend the industry in your favor.
A Five Forces analysis can help you identify latent opportunities for growth. As the Blokia head of product, you might notice that cheaper, tougher touch screens are on the horizon, undercutting the power of your suppliers while also lowering the barrier of entry for competitors. Because you can see coming up in the future, you can prepare now by exerting your power as a buyer to secure more favorable deals at prices potential new competitors won't be able to secure. In other words, you can create a competitive advantage out of preparation.

👉
Get started with this Porter’s Five Forces template.
Copy this doc
After you copy this template, you can start utilizing this free Porter’s Five Forces template for your projects and business.

How to use Porter's five forces analysis with Coda's template.
Step 1: Add analysis for each force
On the
page, you’ll see the 5 forces listed at the top in a table. Below that, click on each of the buttons to add your analysis for each force (related to your company’s competitors). The sample data shows the Porter’s Five Forces analysis for Starbucks. You can clear the sample data and hit each button to start adding your own analysis for each force.

Step 2: Identify estimated impact of each force
On the first table, you’ll see a slider that goes from 1-3. After you and your team have filled out each of the analyses for each force, decide as a group the
impact
of each force in your competitive environment. It’s a simple low/medium/high scale. Once you have the estimated impact, you can start discussing the estimated profitability, go-to-market strategy, and other strategies related to capturing market share in your company’s industry.

Porter's five forces template FAQs
What is the purpose of Porter's Five Forces model?
The purpose of Porter's Five Forces model is to analyze an industry's competitive environment from multiple angles. Besides direct competition with other similar businesses, a business also has to contend with supplier power, buyer power, new competitors, and substitute products. The Five Forces framework takes all these factors into account.

What is the rule of thumb behind Porter's Five Forces model?
The rule of thumb behind Porter's Five Forces is that if all Five Forces are weak in an industry, that industry has a large potential for profit.

How do the Five Forces compete within the industry?
The Five Forces all play off each other in a basic form of supply and demand. For example, if there is little supply of key material, the power of suppliers is high.

What are the limitations of the Five Forces model?
The main limitation of the Five Forces model is that it's static and doesn't account for massive unforeseen shifts in power. The most clear-cut examples of this limitation are rising globalization, which makes it difficult to account for all Five Forces comprehensively, and technological advancement, which makes it difficult to predict disruptors and substitutions.


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