methodatlas
Method guideBusiness Strategy

Porter Five Forces

A practical method guide: clarify prerequisites and materials, understand the complete process, and look up outputs, pitfalls, and stop criteria.

ComplexityMedium
Time1-3 h
Participants2-8
FormatWorkshop + async
MaturityCanonical
Plan
01

Prerequisite

What needs to be finished first

Complete firstIndustry boundary

Product, customer group, geography and value-chain level are named.

Analyse alternative boundaries separately when scope is unclear.
Complete firstEconomic evidence

Prices, concentration, switching costs, entry barriers and substitutes can be evidenced at least partially.

Mark unsupported mechanisms as assumptions.
02

Preparation

What needs to be ready before start

Materials

Industry definition, customer and supplier data, competitor list, cost and price logic, and source register.

People / roles

Strategy owner, market and finance expertise, sales or procurement perspective, and research owner.

Pre-read

Offer, customer group, geography, value-chain level, competitors, substitutes and suppliers.

Time needed

2–4 hours plus market and industry research

Setup

Prepare five force areas; capture mechanism, evidence, trend and implication for every finding.

03

Core question

The one question this method answers

Which industry forces determine profitability, and where can we position effectively?

04

Flow

Phases with goal, actions, output and pitfall

Five Forces analyses industry profitability through rivalry, threat of entrants and substitutes, and bargaining power of suppliers and buyers. Concrete economic mechanisms and change matter more than a simple high-medium-low label.

Porter Five Forces

Fictional example

Industry rivalry is examined together with four sources of structural competitive pressure.

New entrants

Which entry barriers and expected responses shape entry?

Low software costs; certification and sales access moderate entry.

Supplier power

How concentrated, differentiated and replaceable are key inputs?

Sought-after trainers are scarce; content can partly be licensed.

Buyer power

How strongly do buyers aggregate, compare and switch?

Five platforms aggregate contracts; technical switching is easy.

Substitutes

Which different solutions meet the same customer need?

Internal academies and free vendor courses.

Rivalry

How intensely do incumbents compete, and why?

Many similar catalogues, weak differentiation and price pressure.

Harvard Business School: The Five Forces

  1. 1

    Industry

    Define the industry

    Goal

    Explicit industry boundary

    Inputs for this step

    • Offer and customer group
    • Geography and value-chain level

    Actions

    • Set product scope, customers, geography and value-chain level.
    • Separate adjacent industries, complements and substitutes.

    Output

    Industry definition

    In scope, out of scope and rationale

    Quality check

    Does the boundary identify actors competing for the same value pool?

    Pitfall

    The industry is merely the company’s product category. Redefine it from customer need and economic exchange relationships.

    Timing: 20–30 minutes

  2. 2

    Forces

    Investigate five forces

    Goal

    Evidenced force profiles

    Inputs for this step

    • Industry definition
    • Market and company data

    Actions

    • Analyse rivalry, entrants, substitutes, supplier power and buyer power separately.
    • Record concentration, differentiation, switching costs, scale effects and alternatives with sources.

    Output

    Five force profiles

    Mechanism, evidence, trend and affected value

    Quality check

    Is every assessment explained by a mechanism? Are substitutes defined from the customer perspective?

    Pitfall

    Each force receives only an intuitive label. Remove the label and describe cause, evidence and effect first.

    Timing: 60–100 minutes

  3. 3

    Dynamics

    Assess interactions

    Goal

    Structural system view

    Inputs for this step

    • Force profiles
    • Technology and regulatory change

    Actions

    • Mark reinforcing and counteracting interactions.
    • Assess how trends shift barriers, substitutes or bargaining power.

    Output

    Dynamic industry map

    Interaction, direction and horizon

    Quality check

    Does the integrated view reveal more than separate labels?

    Pitfall

    A demand boom is treated as permanent attractiveness. Separate cyclical demand from structural economics.

    Timing: 25–40 minutes

  4. 4

    Options

    Derive positioning options

    Goal

    Strategic options

    Inputs for this step

    • Structural system view
    • Capabilities and goals

    Actions

    • For the strongest forces, state positioning, barrier or business-model options.
    • Test trade-offs, prerequisites and likely reactions by other actors.

    Output

    Option portfolio

    Option, force, prerequisite and risk

    Quality check

    Does each option address an evidenced mechanism? Are buyer, supplier and rival reactions considered?

    Pitfall

    “Differentiate more” remains a generic ambition. Name the exact factor, customer benefit and defence against imitation.

    Timing: 30–45 minutes

  5. 5

    Monitor

    Monitor assumptions

    Goal

    Updateable industry logic

    Inputs for this step

    • Option portfolio
    • Critical assumptions

    Actions

    • Assign an early indicator and source to each critical force.
    • Set owner, threshold and next review.

    Output

    Monitoring plan

    Assumption, signal, source, owner and review

    Quality check

    Could the signal invalidate a strategic option?

    Pitfall

    The analysis is stored as timeless truth. Recheck the boundary and strongest forces at the next strategy cycle.

    Timing: 15–25 minutes

05

Artifact

What comes out at the end

Sketch: what the artifact looks like

Porter Five ForcesBranchenattraktivität über Rivalität, neue Anbieter, Substitute sowie Kunden- und Lieferantenmacht einschätzen
Porter Five ForcesDas Visual zeigt Branchenrivalität in der Mitte und die Kräfte neue Anbieter, Substitute, Lieferantenmacht und Kundenmacht rundherum.Wettbewerbsdynamik einer Branche systematisch einschätzenDie fünf Kräfte zeigen, wo Druck entsteht und welche strategische Positionierung daraus folgt.BedrohungAusweichdruckMachtMachtBranchenrivalitätWettbewerbsintensität imKernmarktNeue AnbieterEintrittsbarrierenSubstitutealternative LösungenLieferantenmachtKonzentration, WechselkostenKundenmachtPreisdruck, WechselbereitschaftAttraktivitäthoch / mittel / niedrigStrategiefragenPositionierung schärfen
Form

Five Forces analysis with industry boundary, evidenced mechanisms, integrated view and strategic options.

Versioning / ownership

Record industry definition and analysis date; update changed mechanisms with new evidence.

Tool alternatives
  • Five Forces canvas
  • Industry economics sheet
  • Source and assumption register

porter-five-forces-working-template.md

Define the industry by product, customer group, geography and value-chain level.

Porter Five Forces: Worksheet

Question

To be confirmed

Desired outcome

To be confirmed

Scope

Complete workflow Time: 2–4 hours plus market and industry research

Complete this worksheet on paper or in your own document during the work.

Preparation for this scope

Method setup

  • Materials: Industry definition, customer and supplier data, competitor list, cost and price logic, and source register.
  • Roles: Strategy owner, market and finance expertise, sales or procurement perspective, and research owner.
  • Advance information: Offer, customer group, geography, value-chain level, competitors, substitutes and suppliers.
  • Overall time needed: 2–4 hours plus market and industry research
  • Setup: Prepare five force areas; capture mechanism, evidence, trend and implication for every finding.

Prepare for the work steps

Industry: Define the industry

  • Offer and customer group
  • Geography and value-chain level

Forces: Investigate five forces

  • Industry definition
  • Market and company data

Dynamics: Assess interactions

  • Force profiles
  • Technology and regulatory change

Options: Derive positioning options

  • Structural system view
  • Capabilities and goals

Monitor: Monitor assumptions

  • Option portfolio
  • Critical assumptions

Porter Five Forces

New entrants

Which entry barriers and expected responses shape entry?

...

Supplier power

How concentrated, differentiated and replaceable are key inputs?

...

Buyer power

How strongly do buyers aggregate, compare and switch?

...

Substitutes

Which different solutions meet the same customer need?

...

Rivalry

How intensely do incumbents compete, and why?

...

Harvard Business School: The Five Forces

Industry: Define the industry

Expected artifact: Industry definition

In scope, out of scope and rationale

Entry:

...

  • Does the boundary identify actors competing for the same value pool?

Forces: Investigate five forces

Expected artifact: Five force profiles

Mechanism, evidence, trend and affected value

Entry:

...

  • Is every assessment explained by a mechanism?
  • Are substitutes defined from the customer perspective?

Dynamics: Assess interactions

Expected artifact: Dynamic industry map

Interaction, direction and horizon

Entry:

...

  • Does the integrated view reveal more than separate labels?

Options: Derive positioning options

Expected artifact: Option portfolio

Option, force, prerequisite and risk

Entry:

...

  • Does each option address an evidenced mechanism?
  • Are buyer, supplier and rival reactions considered?

Monitor: Monitor assumptions

Expected artifact: Monitoring plan

Assumption, signal, source, owner and review

Entry:

...

  • Could the signal invalidate a strategic option?

Open questions and next steps

...

Method guide: https://methodatlas.meierhoff-systems.de/en/methods/porter-five-forces/run-sheet

06

Example output

Concrete filled scenario, fictional example

Fictional example for orientation. Counts and timings describe this case and are not universal requirements.

porter-five-forces-beispiel.md

Concrete filled scenario, fictional example

Fictional example

Industry: Digital training for mid-sized companies in DACH.

Buyer power: high because five procurement platforms aggregate contracts and technical switching is easy. Supplier power: medium; sought-after trainers are scarce, while content can be licensed. Entrants: medium to high due to low software costs, moderated by certification and sales access. Substitutes: internal academies and free vendor courses. Rivalry: high because catalogues are similar and differentiation is weak.

Option: Offer auditable transfer programmes for regulated roles instead of a broad catalogue. This addresses buyer power and rivalry. Critical assumption: compliance leads will pay for auditable competence evidence. Test in five proposal conversations before investment.

07

Pitfalls

Recognize symptoms and steer against them

Quick overview, the full text is in the matching phase in the flow

  1. Define the industryThe industry is merely the company’s product category.View in phase
  2. Investigate five forcesEach force receives only an intuitive label.View in phase
  3. Assess interactionsA demand boom is treated as permanent attractiveness.View in phase
  4. Derive positioning options“Differentiate more” remains a generic ambition.View in phase
  5. Monitor assumptionsThe analysis is stored as timeless truth.View in phase
08

Stop criteria

When to pause, resolve prerequisites, or choose another approach

The industry boundary changes during analysis without being reset.
Core ratings rely on competitor names rather than economic mechanisms.

Where to go next?

Paper illustration of a Strategy Canvas with several value curves
Business Strategy
Blue Ocean Strategy Canvas

Translates the identified competitive forces into a differentiated value curve.

Scenario Planning method illustration showing its working structure
Business Strategy
Scenario Planning

Explores how the monitored forces could develop differently in the future.

View in playbookDevelop Strategy Options Under UncertaintyMove from an assessed level of environmental uncertainty through your own market position to robust strategy options for several future scenarios.

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