Porter Five Forces: How to Use It Without Wasting the Exercise
The Porter Five Forces model is a structured framework for analysing the competitive environment around a business. It examines five pressure points: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products or services, and the intensity of rivalry among existing competitors. Used properly, it gives you a sharper read on where margin is being eroded, where structural advantages exist, and where competitive pressure is likely to come from next.
Most teams run through it once, produce a slide, and move on. That is where the value gets left on the table.
Key Takeaways
- Porter Five Forces is most useful as a living competitive diagnostic, not a one-time slide for a strategy deck.
- The five forces interact with each other. Analysing them in isolation produces a weaker output than mapping how they compound.
- Buyer power and substitution threats are the two forces most consistently underestimated in digital and service-based markets.
- The framework is a lens for asking better questions, not a scoring system that produces a definitive answer.
- Combining Five Forces with primary market research produces significantly more actionable intelligence than desk research alone.
In This Article
Why Most Five Forces Analyses Produce Nothing Useful
I have sat through a lot of strategy presentations over the years. The Five Forces slide is one of the most reliably disappointing. It usually looks thorough: five boxes, each with three or four bullet points, colour-coded red, amber, or green. And then the presenter moves on to the next slide, having said very little about what the analysis actually means for the business.
The problem is not the framework. Porter’s model is genuinely useful. The problem is the way most teams treat it: as a box to tick rather than a question to answer. You fill it in, you present it, and the insight dies in the deck.
When I was running agency operations and we were pitching for significant retained accounts, the competitive landscape section of a pitch was often the thinnest part of our thinking. We knew our own capabilities well. We knew the client’s brief. But the structural forces shaping the client’s market? Often undercooked. It cost us in rooms where the client was testing whether we understood their world, not just our own.
Good Five Forces analysis is not about filling in a template. It is about using the template to surface the questions your strategy needs to answer.
The Five Forces: What Each One Is Actually Measuring
Before you can use the framework well, it helps to be precise about what each force is actually measuring. The labels are familiar. The substance is often glossed over.
Threat of New Entrants
This force measures how easy it is for a new competitor to enter your market and compete effectively. High barriers to entry, such as capital requirements, regulatory licences, proprietary technology, or strong brand loyalty, reduce this threat. Low barriers mean the market is structurally vulnerable to disruption from well-funded or agile newcomers.
In digital markets, this force is frequently underestimated. The cost of building a basic competing product has fallen dramatically over the past decade. The barrier that matters most now is often distribution and trust, not product development. If a new entrant can acquire customers cheaply through paid search or affiliate channels, the moat you thought you had may be narrower than it looks. I have seen this play out in performance marketing: a well-funded challenger brand with a clean landing page and a competent paid search setup can take meaningful market share faster than incumbents expect.
Bargaining Power of Suppliers
This measures how much leverage your suppliers have over your cost base and operational flexibility. If you are dependent on a small number of suppliers, or if switching costs are high, supplier power is elevated. In agency life, this translates directly to talent: when specialist skills are scarce, the people who have them hold significant leverage. During the growth years at iProspect, when we were scaling from around 20 people to over 100, the competition for experienced paid search and SEO talent was intense. That is supplier power in practice.
Bargaining Power of Buyers
This measures how much leverage your customers have over pricing, terms, and the shape of the relationship. Buyer power is high when customers are large relative to your business, when switching costs are low, or when they can credibly threaten to produce what you sell themselves. In B2B marketing, this force is often the most consequential. A single large client representing 40 percent of revenue is not just a commercial risk. It is a structural competitive disadvantage that shapes every strategic decision you make.
Threat of Substitutes
Substitutes are not the same as competitors. A substitute is a different product or service that meets the same underlying need. The threat of substitution is about whether your customers could solve their problem a different way entirely, not just switch to a rival doing what you do. For a conference organiser, the substitute is not another conference. It is a well-produced webinar series, or a curated online community, or a well-timed industry report. The pandemic made this visible in a way that most industries had not seriously modelled.
Competitive Rivalry
This measures the intensity of competition among existing players. High rivalry typically compresses margins, increases marketing spend, and shortens product cycles. Low rivalry, often found in markets with high switching costs or strong differentiation, allows for more sustainable pricing and more strategic breathing room. The key question is not just how many competitors exist, but how aggressively they compete and on what dimensions.
For more frameworks and tools to build a sharper picture of your competitive environment, the Market Research and Competitive Intel hub on The Marketing Juice covers the methods that actually move strategy forward.
How to Build a Five Forces Analysis That Is Worth the Time
The template itself is straightforward. The discipline is in the quality of the inputs and the rigour of the interpretation. Here is how to run the exercise in a way that produces something actionable.
Step 1: Define the Unit of Analysis Before You Start
This sounds obvious. It is routinely skipped. Are you analysing the competitive forces facing the whole business, a specific product line, a geographic market, or a customer segment? The answer changes the analysis materially. A business that sells both to enterprise clients and to SMEs may face completely different competitive dynamics in each segment. Running one Five Forces analysis and treating it as representative of both is not analysis. It is averaging.
Get specific about the unit before anyone writes a word.
Step 2: Gather Evidence Before You Gather Opinions
Most Five Forces workshops run on opinion. The team sits in a room, someone draws five boxes on a whiteboard, and people share their impressions. The output reflects the room’s collective assumptions, which are often shaped more by internal politics than external reality.
Before the workshop, do the desk research. Map the competitor set properly. Look at pricing structures, distribution channels, customer reviews, and job listings (which reveal strategic priorities). Check supplier concentration in your category. Talk to customers about switching costs and alternatives they have considered. Tools like SEMrush’s competitive intelligence features can surface useful data on how competitors are investing in digital channels, which is a reasonable proxy for where they see growth.
Evidence first. Opinions second.
Step 3: Rate Each Force and Document the Reasoning
A simple high, medium, or low rating for each force is sufficient. What matters more than the rating is the documented reasoning behind it. Why is buyer power rated high? What specific evidence supports that? What would have to change for that rating to shift?
This documentation serves two purposes. It makes the analysis challengeable, which is how it improves. And it creates a baseline you can return to in six or twelve months to see what has changed.
Step 4: Map the Interactions Between Forces
This is the step most templates skip entirely, and it is where the real insight lives. The five forces are not independent. They interact, and understanding how they compound or counterbalance each other is what separates a useful analysis from a slide-deck exercise.
For example: high buyer power combined with a high threat of substitutes is a structurally difficult position. Customers can both negotiate hard on price and credibly threaten to leave for a completely different solution. That combination should shape your positioning strategy in a specific way. Recognising that interaction is more valuable than rating each force in isolation.
Conversely, high competitive rivalry combined with high barriers to new entrants means the market is intensely competitive but relatively closed. The battle is among known players. That suggests a different strategic posture than a market where rivalry is moderate but the threat of new entrants is rising.
Step 5: Translate the Analysis Into Strategic Implications
Every Five Forces analysis should end with a short list of strategic implications. Not recommendations, necessarily. Implications: things that must be true about your strategy if this analysis is accurate.
If buyer power is high, your strategy needs a credible answer to that. If the threat of substitutes is rising, your positioning needs to address the underlying job-to-be-done more directly, not just compete on product features. If competitive rivalry is intensifying, margin defence and differentiation become more urgent than growth.
The implications section is where the framework earns its place in a strategy process. Without it, you have an interesting description of the market. With it, you have something that can actually inform decisions.
Where the Framework Has Real Limits
Porter’s model was developed in the context of traditional industry structures. It holds up well in markets with clear boundaries, identifiable competitors, and relatively stable supply chains. It is less naturally suited to platform businesses, ecosystems, or markets where the competitive dynamics are shaped primarily by data and network effects.
It also has a tendency to produce a static picture of a dynamic situation. A Five Forces analysis done in January may look materially different by June if a well-funded competitor launches, a key supplier consolidates, or a regulatory change shifts the barriers to entry. This is not a flaw in the framework so much as a reminder that competitive intelligence is not a project. It is a process.
I have judged at the Effie Awards, where effectiveness is the standard. One thing that stands out in the strongest entries is that the strategic thinking is grounded in a genuine understanding of the competitive context, not just the customer insight. The brands that win tend to have a clear view of where they sit in the competitive structure and what that means for the role their marketing needs to play. Five Forces, done properly, is one of the tools that builds that view.
Forrester’s research on finding sources of innovation and competitive inspiration makes a related point: the most durable competitive advantages are often found by looking at structural market dynamics, not just at what competitors are doing tactically.
Combining Five Forces With Other Competitive Intelligence Methods
Five Forces works best when it is part of a broader competitive intelligence process, not a standalone exercise. A few combinations that produce stronger outputs:
Five Forces plus customer interviews. Desk research can tell you a lot about competitive structure, but customers will tell you things that do not appear in any public data. What alternatives did they seriously consider before choosing you? What would make them switch? What would have to be true for them to look at a completely different type of solution? These conversations add texture to the buyer power and substitution forces that no amount of secondary research can replicate. Tools like Hotjar’s survey features can help you gather structured customer feedback at scale if one-to-one interviews are not feasible.
Five Forces plus PESTLE. PESTLE analysis (political, economic, social, technological, legal, environmental) maps the macro environment. Five Forces maps the competitive structure. Used together, they give you a view of both the external context and the industry dynamics. A regulatory change that appears in PESTLE might directly affect barriers to entry in your Five Forces analysis. Making those connections explicit produces better strategic thinking than running each framework in a separate meeting.
Five Forces plus scenario planning. Rather than producing one Five Forces analysis that represents the current state, consider running the analysis against two or three plausible future scenarios. What does the competitive structure look like if a major platform player enters your category? What if a key supplier consolidates? Scenario-based Five Forces analysis is more complex to run, but it produces strategic options rather than just strategic descriptions.
A Note on How Often to Run This
Annual is the minimum for most businesses. Quarterly is appropriate if you are in a fast-moving market or going through a significant strategic transition. The trigger for an unscheduled review should be any material change in one of the five forces: a significant new entrant, a supplier consolidation, a major shift in customer behaviour, or a competitive move that changes the terms of rivalry.
When I was managing performance marketing at scale across multiple categories, the competitive landscape in some sectors shifted meaningfully within a single quarter. Paid search auction dynamics, new entrants with aggressive CPAs, category leaders pulling back spend. The teams that were monitoring those signals continuously made better allocation decisions than the teams that were working from a competitive analysis done at the start of the year.
The same principle applies to Five Forces. Treat it as a living document, not a historical artefact.
If you want to go deeper on the broader toolkit for competitive analysis and market intelligence, the Market Research and Competitive Intel hub covers the methods, frameworks, and practical approaches that inform better strategic decisions.
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.
