Porter’s Five Forces: A Real-World Strategy Walkthrough

Porter’s Five Forces is a framework for assessing the competitive structure of an industry. It maps five pressure points , supplier power, buyer power, competitive rivalry, threat of substitutes, and threat of new entrants , to give strategists a clear picture of where profit is likely to pool and where it will be competed away.

The framework was developed by Michael Porter at Harvard Business School and published in 1979. It remains one of the most widely used tools in strategic planning because it forces you to think about the industry structure, not just your own position within it. Done properly, it shapes pricing decisions, investment priorities, and market entry strategy.

This article walks through a worked example of the framework applied to a real industry, explains what each force actually measures, and flags where most practitioners go wrong when they use it. If you want the broader context for how competitive analysis fits into a research programme, the Market Research and Competitive Intelligence hub covers the full picture.

What Does Each Force Actually Measure?

Before running the analysis, it helps to be precise about what each force is actually asking. Vague inputs produce vague outputs, and vague outputs don’t change decisions.

Competitive rivalry measures the intensity of competition among existing players. High rivalry typically means price pressure, high marketing spend, and thin margins. It’s driven by the number of competitors, how similar their offerings are, how slow the market is growing, and how high the exit barriers are. When companies can’t leave a market easily, they tend to fight harder for share.

Threat of new entrants measures how easy it is for new competitors to enter the market and take share. High barriers to entry, whether capital requirements, regulation, brand loyalty, or proprietary technology, protect incumbents. Low barriers mean that any margin you earn will attract new competition quickly.

Threat of substitutes measures the risk that buyers will solve their problem a different way entirely, rather than choosing between existing competitors. This is the force most analysts underestimate. The question isn’t “which competitor might win?” but “could buyers stop needing this category altogether, or meet the same need differently?”

Supplier power measures how much leverage suppliers have over the businesses in the industry. If there are few suppliers, high switching costs, or no viable alternatives, suppliers can extract margin from the industry. If suppliers are numerous and interchangeable, their power is low.

Buyer power is the mirror image. If buyers are few, purchase in large volumes, or face low switching costs, they can push prices down and demand better terms. Fragmented buyers with high switching costs have little leverage.

A Worked Example: Applying Five Forces to the UK Grocery Delivery Market

Rather than using a generic or hypothetical industry, it’s more instructive to work through a market that most marketers have direct experience with as consumers. The UK grocery delivery market, covering services like Ocado, Deliveroo Grocery, Getir when it operated, and the supermarket own-delivery arms, is a useful case study because all five forces are active and visible.

I spent a period working with a retail client handling exactly this kind of structural pressure. The board kept asking about competitors. The more useful question was about the structure of the market itself, because that told us where the margin pressure was coming from and whether it was temporary or structural.

Force 1: Competitive Rivalry , High

The UK grocery delivery market has significant rivalry. You have large, well-funded supermarket chains with established logistics infrastructure competing against pure-play delivery businesses with different cost models. Tesco, Sainsbury’s, and Asda have scale and brand loyalty. Ocado has technology and a differentiated proposition. Rapid delivery players competed on speed.

The rivalry is intensified by several structural factors. Switching costs for consumers are low. There is no meaningful lock-in once a subscription lapses. Price comparison is easy and habitual. The product category, groceries, is largely commoditised at the SKU level, which means differentiation has to come from service, speed, or range rather than the product itself.

Market growth has slowed from the pandemic-era spike, which means competitors are increasingly fighting for share rather than riding overall category growth. Exit barriers are moderate , physical infrastructure is hard to redeploy , which means players tend to compete harder rather than exit gracefully.

Verdict: Rivalry is high. This is a market where margin is under constant pressure from within the industry itself.

Force 2: Threat of New Entrants , Moderate to Low

Building a grocery delivery operation at scale requires significant capital investment in logistics, warehouse infrastructure, technology, and supplier relationships. The supermarkets have decades of supply chain development behind them. Ocado spent years and hundreds of millions building its fulfilment technology before it became a licensable asset.

That said, the rapid delivery model briefly lowered the barrier. Companies like Gorillas and Getir entered the market with a different operational model, smaller dark stores, and faster but narrower delivery windows. They raised venture capital to fund the losses required to acquire customers quickly. Several have since exited or been acquired, which is itself a signal about the sustainability of that entry strategy.

New entrants from adjacent categories remain a risk. A major logistics player or a technology platform with existing consumer relationships could enter more credibly than a pure startup. Amazon Fresh is the obvious example of a well-capitalised entrant with relevant infrastructure.

Verdict: The threat of new entrants is moderate. Capital requirements and operational complexity provide some protection, but well-resourced entrants from adjacent markets remain a genuine risk.

Force 3: Threat of Substitutes , Moderate to High

This is the force that gets underweighted. The question isn’t whether Tesco might lose share to Ocado. The question is whether consumers might solve the “I need food at home” problem in a different way entirely.

The substitutes here include meal kit services, restaurant delivery platforms, convenience stores, and , at the most basic level , cooking less and eating out more. None of these are perfect substitutes, but they address the same underlying need: feeding yourself and your household without significant effort.

When I was working on a strategy project for a food-adjacent client, the most useful reframe was to ask what job the consumer was actually hiring the product to do. Once you answer that question, the substitute landscape expands considerably. Grocery delivery isn’t competing only with other grocery delivery services. It’s competing with any solution to the “I need food tonight” problem.

Verdict: The threat of substitutes is moderate to high, particularly for the convenience and speed use cases where restaurant delivery and meal kits compete directly.

Force 4: Supplier Power , Low to Moderate

Grocery retailers have historically held significant power over their suppliers. The major supermarkets have used scale to negotiate aggressively on price, payment terms, and shelf placement. For the largest retailers, supplier power is low because the suppliers need the distribution more than the retailer needs any individual supplier.

The picture is more nuanced for smaller or specialist players. A grocery delivery service with a narrower range and a premium positioning might depend more heavily on specific suppliers for its differentiation. In that case, supplier power increases.

Technology suppliers are a separate consideration. Delivery management software, warehouse automation, and cold chain logistics providers have more leverage than food suppliers because switching costs are higher and the market is more concentrated. BCG has written about how operational dependencies shape strategic options in ways that don’t always show up in a standard financial analysis.

Verdict: Supplier power is low to moderate for food products, but higher for technology and logistics infrastructure where alternatives are fewer.

Force 5: Buyer Power , High

Consumer buyer power in grocery delivery is high. Switching costs are low. Promotional offers are abundant. Price comparison is easy. Consumers have multiple credible alternatives and no meaningful penalty for switching between them.

The result is that acquiring and retaining customers is expensive. Promotional spend is high. Loyalty is shallow. The businesses that have managed this most effectively are those that have built genuine switching costs through subscription models, proprietary product ranges, or service quality that is difficult to replicate.

Verdict: Buyer power is high. This is one of the primary drivers of margin pressure in the market and explains why customer acquisition costs have been so elevated.

What Does the Overall Picture Tell You?

Running through the five forces, the UK grocery delivery market looks structurally difficult. High rivalry. High buyer power. Moderate to high threat of substitutes. Moderate threat of new entrants. The only force working in incumbents’ favour is relatively low supplier power on food products.

This isn’t a pessimistic conclusion. It’s a useful one. It tells you that competing on price alone in this market is a path to margin destruction. It tells you that differentiation, whether through service quality, speed, range, or proprietary products, is not optional. And it tells you that any strategy relying on customer loyalty without active investment in retention is optimistic at best.

I’ve sat in enough strategy sessions where the conversation was entirely about what competitors were doing, and almost none of it was about the structural forces shaping the market. Five Forces is useful precisely because it forces that conversation. It’s not about reacting to a competitor’s latest promotion. It’s about understanding why the market is shaped the way it is.

Where Most Five Forces Analyses Go Wrong

The most common failure is treating Five Forces as a box-ticking exercise rather than a thinking tool. Teams rate each force as high, medium, or low, put it in a slide, and move on. The rating is not the output. The strategic implication is the output.

A second failure is using it as a one-time exercise. Markets are not static. The threat of new entrants in grocery delivery looked very different in 2021, when venture capital was abundant and rapid delivery startups were expanding aggressively, than it does today. The framework needs revisiting when conditions change, not just when a strategy document is being produced.

A third failure is conducting the analysis at the wrong level of granularity. “The food industry” is not a useful unit of analysis. “UK online grocery delivery, specifically the convenience and top-up shopping segment” is. The forces look different depending on which segment you’re actually competing in, and conflating them produces analysis that is technically correct and strategically useless.

When I was judging the Effie Awards, one of the things that separated the entries that impressed from those that didn’t was precision. The teams that had clearly thought about their specific market, not a generalised version of it, made much sharper strategic choices. Five Forces analysis is the same. Precision in the setup produces precision in the output.

Forrester has noted that strategic frameworks are only as useful as the quality of thinking applied to them, which is a polite way of saying that a framework doesn’t do the thinking for you.

How Five Forces Connects to Marketing Strategy

Five Forces is often positioned as a tool for corporate strategists rather than marketers. That’s a false distinction. The structure of the industry determines what marketing can and cannot achieve.

If buyer power is high and switching costs are low, marketing’s job is partly to build the switching costs that the product or service doesn’t naturally provide. Loyalty programmes, subscription models, personalisation, and community are all mechanisms for increasing switching costs. They’re not just marketing tactics. They’re structural responses to a competitive dynamic.

If the threat of substitutes is high, marketing needs to be clear about the job the product does and why it does it better than the alternatives. Vague brand positioning doesn’t help when buyers are genuinely weighing different categories against each other.

If rivalry is high and differentiation is low, price-led marketing will accelerate margin erosion. The strategic response is differentiation, and marketing is the function that has to make that differentiation visible and credible to buyers.

Early in my career, I worked on a campaign for a client in a highly commoditised market where the instinct was always to compete on price because that’s what the sales team said customers cared about. When we mapped the competitive structure properly, it became clear that price sensitivity was a symptom of undifferentiated positioning, not a fixed market condition. The marketing strategy shifted, and so did the pricing conversation.

BCG’s work on pricing strategy in competitive markets makes a similar point: pricing decisions made without understanding competitive structure tend to be reactive rather than strategic.

A Note on Using Five Forces Alongside Other Frameworks

Five Forces is strong on industry structure but doesn’t tell you much about your own capabilities or how to execute. It works best alongside a SWOT analysis, which maps internal strengths and weaknesses against external opportunities and threats, and a PESTLE analysis, which captures the macro-environmental factors that shape the industry over time.

Used together, these frameworks give you a three-layer picture: the macro environment, the industry structure, and your own position within it. That’s the foundation for a strategy that is grounded in reality rather than aspiration.

The Market Research and Competitive Intelligence hub covers the analytical tools and research methods that feed into this kind of strategic work, including how to gather the market data that makes a Five Forces analysis specific rather than generic.

About the Author

Keith Lacy is a marketing strategist and former agency CEO with 20+ years of experience across agency leadership, performance marketing, and commercial strategy. He writes The Marketing Juice to cut through the noise and share what works.

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