What needs to be finished first
A clear definition of the market or segment under consideration is available: geography, buyer group, product category and time horizon are fixed in writing.
An overview of relevant stakeholders (competitors, suppliers, customers, substitutes) with market share or volume is available.
What needs to be ready before start
Five Forces diagram as template (central rivalry plus four surrounding forces); market data from industry reports (Statista, Gartner, IBISWorld); competitor list with revenue and market share; supplier and customer concentration data.
One facilitator with strategy background; two to five participants from strategy, sales, procurement and product; one researcher who supplies data for open questions during the session.
Market definition; list of top 10 competitors with revenue; supplier concentration index; share of largest customers in revenue; known regulatory barriers; substitute categories.
2-4 h workshop, plus 2-3 days data research beforehand
Draw the diagram with five boxes or prepare it in Miro. Use one rating scale per force (1-5: weak to strong) and three rationale slots. Place data sources as stickies next to it. Rule: every rating needs at least one data-backed rationale.
The one question this method answers
How structurally attractive is this market, and which force most strongly limits long-term profitability?
Marker: Phase
| Step | Duration | Action | Hint |
|---|---|---|---|
1Phase 1: Sharpen the market | 20 min | Read the market definition and check boundaries: which segments are in, which are out. Define the time window, for example a 3-year horizon. Name substitute categories explicitly. | If the definition is too broad (for example the entire SaaS market), all forces produce medium values without sharpness. Prefer a sharp segment, such as HR tech in DACH for 100-500 employee companies. |
2Phase 2: Existing rivalry | 30 min | Review competitor list: count, market share distribution (HHI), growth rate, degree of differentiation, exit barriers. Document a 1-5 rating with rationale. | Many equally strong players in a stagnant market means 5 (strong). Few players in a growing market with differentiation is more likely 2-3. |
3Phase 3: Customer and supplier bargaining power | 30 min | For each side, check concentration (top-3 share), switching costs, degree of standardization, threat of backward or forward integration. Rate both forces separately from 1-5. | If one customer represents more than 20% of revenue, customer power is at least 4. In a platform business with many small customers, it is more likely 2. |
4Phase 4: Market entry and substitutes | 30 min | List entry barriers (capital, regulation, economies of scale, network effects, brand strength). Identify substitutes, including indirect ones. Rate both forces separately from 1-5. | Indirect substitutes are often forgotten. Ask: what alternative solves the customer's job, even if the technology is completely different? |
5Phase 5: Synthesis and strategic implication | 30 min | Draw the overall picture: which force has the highest value, which trends shift it. Derive three strategic implications, for example differentiation, supplier diversification, substitute monitoring. | Five Forces describes structure, not action. Implications must become concrete per force, otherwise the model remains a picture without consequence. |
What comes out at the end
Structured document with market definition, five force sections (1-5 rating, three rationales, data source), overall market attractiveness assessment and three derived strategic implications with owner.
Include date and market definition in the header for every analysis. Reassess annually or after major market changes as a new version, do not overwrite. Archive the previous version with date.
Compact working template for Porter Five Forces with context, input, output artifacts, and next step.
Evaluates industry attractiveness through rivalry, suppliers, buyers, substitutes, and new entrants.
When and for what do we use this method?
Which data, observations, decisions, or materials are available?
Short notes along the runsheet.
Owner, date, and success signal.
Concrete filled scenario, fictional example
Concrete filled scenario, fictional example
Rivalry: 4/5 - Personio, HiBob, Factorial and Sage HR share around 55% market share, annual growth 8%, differentiation primarily through integrations and UX.
Customer power: 3/5 - Medium switching costs through data import and training, no single customer above 0.5% revenue, but review portals (G2, OMR) increase price transparency.
Supplier power: 2/5 - Cloud infrastructure (AWS, Azure) is commodity; AI API providers (OpenAI, Anthropic) create medium dependency for new features.
Entry barriers: 3/5 - Compliance (GDPR, social insurance APIs) and brand trust are barriers, but vertical SaaS tooling lowers technical hurdles.
Substitutes: 2/5 - Excel and generic ERPs cover basic functions; niche tools (recruiting-only) displace modules one by one.
Implications: Invest in integrations (Owner: @julia, Q3), diversify AI supplier strategy (Owner: @marcus, Q4), increase switching costs through workflow depth (Owner: @anna, Q3-Q4).
Recognize symptoms and steer against them
All five forces land at 3/5, no force stands out, discussion remains abstract.
Cut the segment more tightly: geography, buyer size or use case. Better three separate analyses for three segments than one blanket analysis.
Ratings are assigned by consensus without market shares, concentration indices or concrete examples.
No rating without at least one hard number or concrete example per force. Researcher supplies missing data within the next 48 h.
Substitute force is set to 1-2 because only direct alternatives were considered.
Ask: what would the customer use if our market disappeared tomorrow? List indirect solutions explicitly (Excel, consulting, in-house tool).
The team leaves the workshop with ratings 4/5/3/3/2 and no derived strategic consequence.
Formulate at least one implication per force with owner and quarterly goal. Without a so-what, the analysis is useless.
Ratings refer to today's market without trends or developments over three years.
Add a trend arrow per force (rising, falling, stable) with rationale. Strategy follows the direction, not the point.
Competitor list only contains DACH players although global competitors are gaining market share.
Explicitly include international competitors that serve the segment or may enter soon. Use CB Insights or Crunchbase as data source.
Done signals checkable in under a minute
Go to the profile for purpose, similar methods, and sources or continue to the next method in the catalog.