Porter’s Five Forces: The Strategy Tool Most Marketers Underuse

Porter’s Five Forces is a framework for analysing the competitive structure of an industry by examining five pressures that shape profitability: competitive rivalry, the threat of new entrants, the threat of substitutes, the bargaining power of buyers, and the bargaining power of suppliers. Developed by Michael Porter at Harvard Business School in 1979, it remains one of the most durable tools in strategic planning because it forces you to look at your market as a system, not just a list of competitors.

Most marketers know the name. Far fewer use it properly. The framework is often treated as an academic exercise, something you sketch in a strategy deck to show rigour and then ignore when the brief lands. That’s a waste of a genuinely useful tool.

Why Marketers Should Care About an Economics Framework

There’s a version of marketing that lives entirely inside the funnel. Impressions, clicks, conversions, retention. It’s measurable, reportable, and increasingly automated. It’s also dangerously narrow. When I was running agencies, the clients who struggled most weren’t the ones with poor creative or weak media plans. They were the ones who didn’t understand the structure of the market they were competing in. They were optimising campaigns inside a game they didn’t fully understand.

Porter’s Five Forces is a corrective to that. It pulls you up from the campaign level and forces you to ask: what are the actual forces shaping this industry’s profitability, and where does marketing have leverage against them? That’s a different question from “how do we beat Competitor X this quarter.” Both questions matter. But most marketing teams only ask the second one.

The broader discipline of market research and competitive intelligence gives you the raw material to answer questions like these. If you’re building out that capability, the Market Research and Competitive Intel hub covers the full landscape, from intelligence tools to research methodologies to strategic frameworks. Five Forces sits within that ecosystem as one of the more structurally rigorous tools available.

What Are the Five Forces?

Before getting into application, it’s worth being precise about what each force actually measures. The model is often summarised loosely, and loose summaries produce loose analysis.

Force 1: Competitive Rivalry

This is the intensity of competition among existing players in the market. It’s not just about how many competitors there are, but how aggressively they compete. High rivalry tends to compress margins, increase marketing spend requirements, and reduce pricing power. Factors that drive rivalry up include slow industry growth (where gains come at a competitor’s expense), low switching costs for buyers, undifferentiated products, and high exit barriers that keep underperforming players in the market longer than they should be.

For marketers, high rivalry is a signal that brand differentiation and customer retention are critical investments, not optional ones. If everyone in your category is selling roughly the same thing, the fight moves to perception, experience, and relationship. That’s a marketing problem, not just a product problem.

Force 2: Threat of New Entrants

This measures how easy it is for new competitors to enter your market. High barriers to entry, things like capital requirements, regulatory approvals, established distribution networks, or strong brand loyalty, protect existing players. Low barriers mean the market can be disrupted quickly, and any margin you’ve built can attract new competition within months.

Digital markets have systematically lowered entry barriers across many categories. The cost of launching a direct-to-consumer brand, a SaaS product, or a content-driven media business has fallen dramatically. That changes the threat profile for a lot of industries that used to feel protected. I’ve watched this happen in financial services, travel, and retail over the past two decades. The incumbents who survived were the ones who recognised the structural shift early, not the ones who kept optimising the model that had worked for the previous ten years.

Force 3: Threat of Substitutes

Substitutes are products or services that meet the same underlying need through a different means. This is distinct from direct competition. A substitute for a gym membership isn’t another gym, it’s a fitness app, a home workout routine, or a cycling club. The threat of substitutes limits how much you can charge and how loyal customers will remain when alternatives emerge.

This force is particularly easy to underestimate because substitutes often come from outside your defined category. Companies that define their competitive set too narrowly miss substitute threats until they’re already losing share. The travel industry didn’t fully reckon with video conferencing as a partial substitute for business travel until the pandemic made it impossible to ignore. The signal was there years earlier.

Force 4: Bargaining Power of Buyers

This measures how much leverage your customers have over pricing and terms. Buyer power is high when customers are concentrated (a few large buyers account for most of your revenue), when switching costs are low, when the product is undifferentiated, or when buyers have credible alternatives. High buyer power pushes prices down and increases the cost of acquisition and retention.

From a marketing perspective, buyer power shapes where you invest. If buyers have high power and low switching costs, you have to work harder on loyalty and perceived value. If buyers are fragmented and switching is expensive, you have more room to invest in acquisition. Neither situation is inherently better, but they require different strategies.

Force 5: Bargaining Power of Suppliers

This is the force most marketers think about least, and it’s often the one that catches businesses off guard. Supplier power is high when there are few suppliers of a critical input, when switching suppliers is costly or slow, or when suppliers can credibly threaten to integrate forward into your market. When supplier power is high, your costs go up and your operational flexibility goes down.

For digital marketers, the most obvious high-power supplier in the room is Google. The advertising ecosystem is structured in a way that gives a small number of platforms extraordinary leverage over how and at what cost you can reach your audience. The structural tensions in Google’s model have been documented extensively, and they’re a textbook example of supplier power operating at scale. When a single platform controls a disproportionate share of your customer acquisition, that’s a Five Forces problem, not just a media planning problem.

How to Run a Five Forces Analysis That’s Actually Useful

The mechanics of Five Forces are straightforward. The discipline required to do it well is not. Here’s how to approach it in a way that produces decisions rather than slides.

Step 1: Define the Industry Precisely

This sounds obvious and is routinely done badly. The industry you define shapes every conclusion that follows. Too broad, and the analysis becomes generic. Too narrow, and you miss the forces that are actually shaping your market. A useful test: define the industry at the level where a change in one player’s strategy materially affects the others. That’s your unit of analysis.

For example, “digital marketing services” is too broad to be useful. “Performance marketing agencies serving mid-market e-commerce brands in the UK” is a definition that produces actionable analysis. The forces look completely different at those two levels of specificity.

Step 2: Score Each Force on Intensity

For each of the five forces, assess whether the pressure is low, medium, or high, and document the specific factors driving that assessment. Don’t just score it. Write down what’s actually creating the pressure. “Competitive rivalry is high because the top six players are all chasing the same enterprise segment with similar pricing and undifferentiated positioning” is useful. “Competitive rivalry is high” is not.

The scoring itself matters less than the reasoning behind it. Two people can look at the same market and score a force differently, and both can be right depending on their assumptions. The value is in making those assumptions explicit so they can be tested and updated.

Step 3: Identify the Dominant Forces

Not all five forces carry equal weight in every industry. In some markets, supplier power is the defining constraint. In others, the threat of substitutes is the existential question. Identify which one or two forces are most determinative of profitability in your specific market, because those are where strategy needs to respond.

BCG’s work on time-based competition is a useful complement here. In fast-moving markets, the speed at which forces shift can matter as much as their current intensity. A force that’s currently low can become high quickly if a major platform changes its algorithm, a regulatory change removes a barrier, or a well-funded new entrant arrives. The analysis should reflect not just the current state but the direction of travel.

Step 4: Translate Forces into Strategic Choices

This is where most Five Forces analyses fail. The framework is diagnostic, not prescriptive. It tells you where the pressure is. It doesn’t tell you what to do. That step requires judgment, and it’s the step that gets skipped when the framework is treated as a deliverable rather than a thinking tool.

For each dominant force, ask: what does this mean for our positioning, our pricing, our channel strategy, and our investment priorities? A market with high buyer power and low switching costs calls for a different marketing strategy than one with high entry barriers and loyal customers. The forces should inform the choices, not just describe the environment.

How Each Force Connects to Marketing Strategy

Five Forces is often positioned as a corporate strategy tool, and it is. But each force has direct implications for marketing decisions. Here’s how that connection works in practice.

Competitive Rivalry and Brand Investment

High rivalry is the clearest justification for brand investment. When products are functionally similar and switching costs are low, brand becomes the primary differentiator. The case for brand spending isn’t aesthetic, it’s structural. If your Five Forces analysis shows high rivalry, the question isn’t whether to invest in brand. It’s whether you’re investing enough to create a meaningful perception gap between you and the field.

I spent several years judging the Effie Awards, which recognise marketing effectiveness. The campaigns that consistently performed best in highly competitive categories weren’t the ones with the cleverest creative. They were the ones where the brand had built enough distinctiveness that price pressure didn’t immediately translate into share loss. That distinctiveness is built over time, and it starts with understanding that rivalry makes it necessary.

New Entrant Threats and Positioning Defensibility

If entry barriers are low in your market, your positioning needs to be harder to replicate than your product. Features can be copied. A distribution network, a community, a data asset, a brand reputation built over years, these are harder to replicate quickly. Marketing strategy in low-barrier markets should prioritise building these structural advantages, not just acquiring customers.

Social listening is one of the tools that helps you spot new entrants early, before they’ve built enough presence to show up in your sales data. Platforms like Later’s social media listening tools can surface brand mentions and category conversations that signal emerging competitors. The earlier you see them, the more options you have.

Substitute Threats and Category Definition

The threat of substitutes has a direct implication for how you define and communicate your category. If substitutes are a real threat, you need to make the case for your category, not just your brand. This is category marketing, and it’s often underfunded because it’s harder to attribute than product-level campaigns.

When I was at lastminute.com, the substitute threat for last-minute travel deals wasn’t just other travel sites. It was the option of not travelling at all, or booking further in advance at a lower price. The category had to sell the emotional value of spontaneity and the practical value of last-minute availability, not just the mechanics of the booking process. That framing came from understanding the substitute landscape, not just the competitive one.

Buyer Power and Customer Retention Economics

High buyer power changes the economics of customer acquisition and retention in ways that should directly influence your marketing budget allocation. When buyers can switch easily and have credible alternatives, the cost of acquisition rises and the value of retention increases. In these markets, investing in loyalty, personalisation, and customer experience isn’t a nice-to-have. It’s a structural response to the power dynamic.

Reputation management also becomes more important in high buyer power markets. Buyers who have leverage will use it, and negative sentiment travels faster than positive sentiment. Tools that help you monitor and respond to reputation signals, like reputation management software, become operationally relevant in these environments, not just tactically useful.

Supplier Power and Channel Diversification

The marketing implication of high supplier power is straightforward: channel concentration is a strategic risk. If the majority of your customer acquisition runs through a single platform, you’ve handed that platform significant leverage over your business. This isn’t a hypothetical concern. I’ve seen it play out repeatedly, agencies and brands that built their entire acquisition model on one channel and then faced margin compression, algorithm changes, or policy shifts that they had no ability to influence.

The strategic response is channel diversification, but not for its own sake. The goal is to reduce dependency on any single supplier of reach. Content, SEO, email, owned communities, partnerships, these aren’t just tactical options. In a high supplier power environment, they’re structural hedges. Tools like content feed tools that help you distribute across multiple channels are part of that infrastructure.

Where the Model Has Limits

Porter’s Five Forces is a powerful framework and a limited one. Being clear about its limitations makes it more useful, not less.

The model was developed for relatively stable industries with clear boundaries. Digital markets don’t always behave that way. Platform businesses, marketplace models, and network-effect-driven categories can restructure faster than the framework assumes. A market that looks moderately competitive today can look like a monopoly in three years if one player achieves sufficient network density. Five Forces doesn’t capture that dynamic particularly well.

The framework also treats the five forces as external to the firm. In practice, companies shape the forces that affect them. A brand that achieves genuine loyalty reduces buyer power. A business that builds proprietary data assets raises the effective entry barrier for competitors. A platform that signs long-term supplier contracts reduces supplier leverage. Strategy isn’t just a response to forces, it’s an attempt to reshape them. The model is better at diagnosis than it is at capturing this dynamic dimension.

There’s also a tendency to use Five Forces as a snapshot rather than a continuous process. Markets change. The forces that defined your industry three years ago may not be the ones defining it now. I’ve seen businesses do a thorough Five Forces analysis, file it in a strategy deck, and then operate for years as if the conclusions were permanent. The value of the framework is in the regular reapplication, not the one-time output.

Finally, Five Forces operates at the industry level. It doesn’t tell you much about your specific competitive position within that industry. For that, you need tools like value chain analysis, positioning maps, or more granular competitive intelligence work. Five Forces tells you what game you’re playing. It doesn’t tell you whether you’re playing it well.

Five Forces in Practice: A Worked Example

Abstract frameworks become useful when you see them applied to a concrete situation. Here’s how a Five Forces analysis might look for a mid-size SaaS business operating in the digital experience platform space.

Competitive Rivalry: High. The digital experience platform market has a significant number of established players, from enterprise-grade platforms to more accessible mid-market tools. Vendors compete aggressively on features, pricing, and integration capabilities. Switching costs exist but are not prohibitive once a business decides to move. The Gartner Magic Quadrant for this space, which platforms like Optimizely track closely, illustrates how contested the positioning is across the leader, challenger, and niche player segments.

Threat of New Entrants: Medium. Entry barriers in SaaS are lower than in traditional software, but building a credible enterprise-grade platform requires significant engineering investment, security compliance, and a track record of enterprise deployments. The barrier isn’t capital alone, it’s credibility. New entrants can enter the SMB segment relatively easily, but moving upmarket takes years.

Threat of Substitutes: Medium-High. The substitute threat comes from adjacent categories: CMS platforms expanding their feature sets, headless commerce solutions, marketing automation platforms adding personalisation capabilities, and internal build options for large enterprises with engineering resources. The category boundary is genuinely porous.

Bargaining Power of Buyers: High. Enterprise buyers are sophisticated, run structured procurement processes, and have credible alternatives at every price point. Multi-year contracts are common but so is churn at renewal when performance expectations aren’t met. Buyer power is high and rising as the market matures.

Bargaining Power of Suppliers: Low-Medium. Infrastructure suppliers (cloud providers, CDN networks) have some leverage, but there are credible alternatives and most platforms have multi-cloud strategies. The more significant supplier risk is talent: the engineering and product teams that build and maintain the platform are scarce and mobile.

The dominant forces here are competitive rivalry and buyer power. The strategic implications for marketing are clear: differentiation has to be specific and defensible (not just feature lists), customer success and retention investment is as important as acquisition, and the brand needs to do real work in a market where buyers are doing serious due diligence before they commit.

Combining Five Forces with Other Competitive Tools

Five Forces works best as part of a broader analytical toolkit, not as a standalone exercise. Here’s how it connects to other frameworks and tools that marketers typically use.

SWOT analysis is often done before Five Forces, but it’s more useful after. Once you understand the structural forces in your market, you can assess your strengths and weaknesses in context. A strength that isn’t relevant to the dominant forces in your market isn’t much of a strategic asset. A weakness that directly exposes you to a high-pressure force is a priority to address.

Customer research gives you the ground-level data that Five Forces analysis can’t provide. The framework tells you that buyer power is high. Customer interviews and surveys tell you specifically what buyers are comparing, what would make them switch, and what they value that competitors aren’t delivering. These are complementary inputs, not substitutes for each other.

Competitive intelligence tools feed the ongoing monitoring that keeps your Five Forces analysis current. Search data, social signals, ad intelligence, and web analytics can all surface changes in competitive intensity, new entrant activity, and shifts in buyer behaviour before they show up in your commercial results. The analysis is a starting point. The intelligence programme is what keeps it alive.

The full picture of what competitive intelligence tools cover, and which ones are worth the investment, is something I’ve covered in depth across the Market Research and Competitive Intel section of The Marketing Juice. Five Forces gives you the strategic frame. Intelligence tools give you the data to fill it.

The Questions Most Teams Don’t Ask

In my experience running agencies and working with clients across 30 industries, the strategic conversations that produce the most value are rarely the ones about what competitors are doing. They’re the ones about the structure of the market itself. Why is this industry profitable? What would have to change for it to become less profitable? Which forces are we most exposed to, and what are we doing about them?

Most marketing teams don’t ask these questions because they’re not in the brief. The brief says “grow market share” or “launch this product” or “hit this acquisition target.” The structural questions feel like someone else’s job, usually strategy or corporate development. But the marketers who do the best work are the ones who understand the structural context they’re operating in. It changes what you prioritise, what you argue for in budget conversations, and what you’re willing to stop doing.

Early in my career, I asked for budget to build a new website and was told no. Rather than accepting that as a final answer, I taught myself enough to build it anyway. That instinct, finding a way to understand the full picture rather than just your corner of it, is what separates marketers who operate at a strategic level from those who execute well but never quite influence the decisions that matter.

Five Forces is one of the tools that builds that broader understanding. It won’t tell you which headline to test or which audience to target. But it will tell you whether the market you’re in is one where marketing can create durable advantage, or one where you’re fighting a structural tide regardless of how well you execute. That’s worth knowing.

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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