Porter Five Forces: Use It Like a Strategist, Not a Student

The Porter Five Forces model is a framework for analysing the competitive structure of an industry by examining five pressures: competitive rivalry, the threat of new entrants, the threat of substitutes, the bargaining power of suppliers, and the bargaining power of buyers. Used properly, it gives marketers and strategists a structured way to assess where an industry is vulnerable, where power sits, and where a business has room to manoeuvre.

Most teams fill out the template and stop there. That is the problem. The framework is only useful if it changes how you think about positioning, pricing, or investment. If it ends up in a slide deck and never gets referenced again, you have done analysis without strategy.

Why Most Teams Use This Framework Wrong

I have sat in a lot of strategy sessions over the years. Across agencies, across clients, across industries. And there is a pattern I keep seeing with analytical frameworks: teams treat completion as the goal. They fill in the boxes, present the output, and move on to the next slide. The Five Forces model suffers from this more than most.

Michael Porter introduced the framework in 1979 in a Harvard Business Review article, and it remains one of the most widely taught tools in business education. That ubiquity is both its strength and its weakness. Because everyone has seen it, most people assume they know how to use it. They do not. They know how to fill it in. That is a different skill.

The distinction matters. Filling in the template tells you what forces exist. Using the framework tells you what those forces mean for your business and what you should do differently as a result. If your Five Forces analysis does not produce at least one specific strategic implication, it has not done its job.

If you are building out a broader competitive intelligence process, the Market Research and Competitive Intel hub covers the full range of tools and approaches, from customer research to competitor mapping to industry analysis. Five Forces sits within that wider system, not above it.

What Each Force Is Actually Measuring

Before getting into the template itself, it is worth being precise about what each force is measuring. The language is familiar enough that people assume they understand it, but the details matter.

Competitive rivalry is not just about how many competitors you have. It is about the intensity of competition: how aggressively competitors pursue market share, whether competition is primarily on price or on differentiation, how similar the offerings are, and whether the industry is growing or contracting. A market with three players can have brutal rivalry. A market with thirty can be relatively stable if everyone has carved out a distinct position.

Threat of new entrants is about barriers to entry, not just the absence of new competitors today. High barriers (capital requirements, regulatory hurdles, established brand loyalty, proprietary technology) protect incumbents. Low barriers mean the competitive landscape can change quickly. When I was working with a client in a niche B2B software category, the absence of any meaningful barrier to entry was the single biggest strategic risk on the table. It was not visible in their revenue numbers yet, but it was visible in the Five Forces analysis.

Threat of substitutes is often confused with competitive rivalry. Substitutes are not direct competitors. They are alternative ways a buyer can meet the same need. A taxi company’s substitute is not another taxi company. It is a bus, a bicycle, or the decision to work from home. Substitutes set a ceiling on pricing power and define the boundaries of the market you are actually competing in.

Bargaining power of suppliers is the force most marketing teams underestimate. If your suppliers are concentrated, if switching costs are high, or if the inputs they provide are critical and hard to replicate, they hold power over your margins. In agency life, this showed up in platform dependency. When a single ad platform controls a significant portion of your media mix, that platform has supplier power over your business. The implications for strategy are significant.

Bargaining power of buyers is about how much leverage customers have to demand lower prices, better terms, or higher quality. Buyer power is high when customers are large relative to suppliers, when products are undifferentiated, when switching costs are low, or when buyers have credible alternatives. Understanding buyer power shapes pricing strategy, retention investment, and how much you can afford to invest in acquisition.

The Template: How to Structure Your Analysis

The template below is designed to produce strategic output, not just a filled-in grid. For each force, you are working through three layers: the factors that determine the intensity of the force, your assessment of whether that force is weak, moderate, or strong, and the strategic implication for your business.

That third layer is where most templates fall short. They capture the first two and skip the third. Do not do that.

Force 1: Competitive Rivalry

Factors to assess: number of competitors, relative size and capability, rate of industry growth, product differentiation, switching costs, exit barriers, price competition intensity.

Rating: Weak / Moderate / Strong

Strategic implication: What does the intensity of rivalry mean for how you compete? If rivalry is high and undifferentiated, the implication might be to invest in brand positioning that creates distance from commodity competition. If rivalry is low, the implication might be to expand aggressively before that changes.

Force 2: Threat of New Entrants

Factors to assess: capital requirements to enter, regulatory requirements, access to distribution channels, economies of scale enjoyed by incumbents, brand loyalty and switching costs, proprietary technology or IP, expected retaliation from incumbents.

Rating: Weak / Moderate / Strong

Strategic implication: If barriers are low, what are you doing to build them? Brand, proprietary data, network effects, and long-term contracts are all barrier-building strategies. If barriers are high, how are you using that protection to invest in growth rather than defence?

Force 3: Threat of Substitutes

Factors to assess: availability of substitute products or services, relative price-performance of substitutes, buyer propensity to switch, switching costs to substitutes.

Rating: Weak / Moderate / Strong

Strategic implication: If substitutes are strong, your pricing ceiling is constrained and your value proposition needs to be explicitly superior, not just different. If substitutes are weak, you have more pricing power than you may be using.

Force 4: Bargaining Power of Suppliers

Factors to assess: number of suppliers, uniqueness of their product or service, your switching costs, supplier concentration relative to your industry, supplier ability to integrate forward, importance of your business to the supplier.

Rating: Weak / Moderate / Strong

Strategic implication: High supplier power compresses margins and limits flexibility. The strategic response might be supplier diversification, vertical integration, or building proprietary capabilities that reduce dependency. In a media context, this might mean investing in owned channels to reduce platform dependency.

Force 5: Bargaining Power of Buyers

Factors to assess: buyer concentration, volume purchased per buyer, product differentiation, switching costs for buyers, buyer price sensitivity, buyer ability to integrate backward, availability of information to buyers.

Rating: Weak / Moderate / Strong

Strategic implication: High buyer power means you are likely competing on price more than you want to be. The strategic response is differentiation, switching cost creation, or moving upmarket to buyers with less leverage. Low buyer power means you have room to improve margins or invest in retention over acquisition.

How to Score and Summarise the Analysis

Once you have assessed all five forces, the next step is a summary view. This does not need to be complicated. A simple scoring approach works: rate each force on a scale of one to five, where one is weak and five is strong. Add the scores. A total score toward the lower end suggests a structurally attractive industry where competitive pressure is manageable. A total toward the higher end suggests a structurally difficult industry where margins will be under persistent pressure.

The number is not the point. The point is the pattern. Which forces are strongest? Which are weakest? Where is your business most exposed, and where does it have natural advantages? Those are the questions the summary should answer.

When I was helping turn around a loss-making agency, one of the first things we did was an informal version of this analysis. The picture was clear within an hour: buyer power was extreme (large clients, no differentiation, easy to switch agencies), competitive rivalry was intense, and barriers to entry were negligible. The business was structurally weak. That analysis shaped everything that followed: the decision to specialise, to raise prices for new clients, and to build proprietary capabilities that created genuine switching costs. The framework did not solve the problem, but it named it clearly enough that we could act on it.

Where the Framework Has Limits

Porter’s model is a snapshot. It captures industry structure at a point in time, but industries evolve. The forces that shaped a market in 2015 may look very different in 2025. Digital platforms have compressed barriers to entry across dozens of sectors. Globalisation has expanded both the supplier landscape and the competitive set. Regulatory shifts have altered buyer and supplier dynamics in ways that were not foreseeable five years earlier.

This is why Five Forces should be a periodic review, not a one-time exercise. Doing it once and filing it away is almost worse than not doing it at all, because it gives you false confidence that you understand your competitive environment when what you actually have is a dated picture of it.

The framework also has a structural blind spot: it focuses on industry-level forces and can underweight firm-level capabilities. Two businesses in the same industry facing the same Five Forces can perform very differently based on execution, talent, and culture. The model tells you about the terrain. It does not tell you how well your team can handle it.

There is also a tendency to use Five Forces in isolation when it works better in combination. Pair it with a SWOT to connect industry structure to internal capability. Pair it with a competitor analysis to ground the structural view in specific competitive behaviour. Pair it with customer research to validate your assumptions about buyer power and substitute threat. The framework is one input into a broader analytical process, not a standalone answer.

Building that broader process is something worth investing in. If you are developing a more systematic approach to competitive intelligence, the resources across the Market Research and Competitive Intel hub cover the full toolkit, including how to structure ongoing competitor monitoring, customer insight programmes, and industry analysis that actually feeds into planning.

Applying Five Forces to Marketing Strategy Specifically

Most treatments of this framework are written for general business strategy. But there are specific implications for marketing that are worth drawing out.

High competitive rivalry with low differentiation is a signal to invest in brand, not performance marketing. If everyone in the category is running the same paid search campaigns and targeting the same keywords, you are in a bidding war that rewards the biggest budget, not the best strategy. Brand investment that creates genuine preference is the way out of that trap. I saw this play out repeatedly when I was managing large paid search budgets. The clients who were winning on paid search in competitive categories were almost always the ones with strong brand recognition. The click-through rates were higher, the quality scores were better, and the conversion rates reflected the trust that brand had built. Performance marketing captures demand. Brand creates it.

High threat of substitutes is a signal to invest in category education, not just product marketing. If buyers can meet their need another way entirely, your job is partly to make the case for the category before you make the case for your product. This is often underinvested because it feels less attributable than bottom-of-funnel activity. But if you are losing to “we’ll just do it in-house” or “we’ll use a different approach entirely,” that is a substitute threat, and no amount of retargeting will fix it.

High buyer power is a signal to focus on retention and differentiation over acquisition. If customers can switch easily and negotiate hard on price, the economics of acquisition become unfavourable. Every pound spent acquiring a customer who churns quickly or who negotiates your margin away is a pound wasted. The smarter investment is in deepening relationships with existing customers, building switching costs through integration, and moving toward customers who have less leverage.

Low barriers to entry is a signal to move fast and build brand before the market fills up. Early in a new category, the window to establish brand recognition and customer relationships is narrow. I have watched businesses in genuinely interesting new markets move too slowly and find themselves in a commodity fight within three years because they did not use their early-mover advantage to build something defensible. Speed matters when barriers are low.

For teams thinking about how to connect competitive analysis to campaign planning, the approach outlined in resources like Unbounce’s multi-channel campaign launch thinking is worth reviewing as a complement to the structural analysis Five Forces provides. Understanding the competitive landscape shapes what you say, where you say it, and how aggressively you need to invest.

Making the Output Usable

A Five Forces analysis that sits in a strategy document and never gets referenced is a waste of everyone’s time. The output needs to be translated into something actionable. Here is a simple structure for doing that.

For each force you have rated as strong or very strong, write one specific strategic response. Not a vague direction like “invest in differentiation,” but a specific action: “Develop a proprietary data asset that competitors cannot replicate within 12 months” or “Restructure pricing to move from project-based to retainer-based to increase switching costs.” Specific actions can be owned, resourced, and tracked. Vague directions cannot.

Then connect those strategic responses to your marketing plan. Where does messaging need to shift? Where does channel investment need to change? Where does the product or service itself need to evolve to address a structural weakness? The Five Forces analysis should leave a visible mark on your planning, or it has not done its job.

For teams building out their planning process, thinking about how competitive intelligence connects to campaign execution is worth the time. Optimizely’s thinking on campaign management is useful context for how strategic inputs translate into execution decisions, which is where most of the value is either created or lost.

Finally, set a review cadence. Five Forces is not a one-and-done. Quarterly is probably too frequent for most businesses. Annually is probably too infrequent in fast-moving categories. Every six months, or whenever there is a significant shift in the competitive landscape, is a reasonable default. The goal is to keep the analysis live enough to be useful, not to turn it into a bureaucratic exercise.

The framework has survived nearly five decades because the underlying logic is sound: industry structure shapes profitability, and understanding that structure is a prerequisite for competing intelligently within it. Use it as a thinking tool, not a reporting template, and it will earn its place in your planning process.

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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