Porter’s Five Forces: A Worked Example for Marketers

A Porter’s Five Forces analysis maps the structural pressures shaping competition in any market: supplier power, buyer power, the threat of new entrants, the threat of substitutes, and competitive rivalry. Working through a real example shows how the framework moves from abstract theory to something that actually informs marketing and commercial strategy.

The worked example below uses a mid-size software-as-a-service business, but the logic applies across industries. The goal is not to produce a perfect academic diagram. It is to surface the forces that most constrain your room to manoeuvre, so you can build strategy around reality rather than assumption.

I have run this exercise with leadership teams across a wide range of categories, from financial services to retail to B2B technology. The pattern is consistent: teams find the rivalry quadrant easy and the substitutes quadrant uncomfortable. That discomfort is usually where the most useful thinking lives.

What Is the Point of a Five Forces Analysis in a Marketing Context?

Michael Porter introduced the framework in 1979 as a way to assess industry attractiveness and long-run profitability. Most MBA programmes teach it as a strategic planning tool. In practice, it is also a sharp diagnostic for marketers who want to understand why their category behaves the way it does.

Pricing pressure, margin erosion, churn rates, the difficulty of winning new customers, the cost of retaining existing ones: all of these are downstream effects of the forces Porter identified. When I was leading an agency through a period of rapid growth, we had a client in a category where buyer power was exceptionally high. Three procurement teams controlled access to roughly 60 percent of the addressable market. Every brief came with a rate card already attached. Understanding that dynamic structurally, rather than just as an operational frustration, changed how we advised them on positioning and channel strategy. The problem was not their messaging. It was the structure of the market they were operating in.

If you are building out your competitive intelligence capability more broadly, the Market Research and Competitive Intel hub covers the tools, methods, and frameworks that sit alongside Five Forces analysis, including search intelligence, web analytics, and ad creative monitoring.

The Worked Example: A B2B SaaS Business in Project Management Software

The category: cloud-based project management software aimed at mid-market professional services firms. The business has been trading for six years, has around 800 paying customers, and is growing at roughly 25 percent year on year. It is not a startup, not an enterprise player. It sits in the messy middle of the market.

This is a useful example precisely because it is not a dominant player. Five Forces analysis is most instructive when the business does not have the market power to simply override the forces it faces.

Force 1: Competitive Rivalry

This is the force most teams instinctively reach for first, and the one they tend to over-index on. In project management software, rivalry is intense. There are well-funded incumbents with strong brand recognition, several well-capitalised challengers, and a long tail of niche tools targeting specific verticals or workflows.

For this business, the relevant competitive set is not the entire category. It is the subset of tools that mid-market professional services firms actually shortlist. That narrows the field considerably, but it does not reduce the intensity of rivalry. Competitors in this space compete heavily on feature parity, pricing, and integration depth. Differentiation is hard to sustain because product updates are frequent and visible.

The marketing implication: competing on features is a race with no finish line. The businesses that hold margin in this category tend to compete on something harder to copy, whether that is category expertise, onboarding quality, or a network of integrations that creates genuine switching costs. Rivalry being high does not mean you cannot win. It means you need to be clear about the dimension on which you are choosing to compete.

Rating for this business: High rivalry. This is a crowded, fast-moving category with low structural barriers to feature competition.

Force 2: Threat of New Entrants

The threat of new entrants depends on the barriers to entry in the category. In SaaS, the barriers to building a minimum viable product have fallen sharply. A credible project management tool can be built with a small team and modest capital. That makes the category structurally open to new entrants at the lower end.

The more significant threat for a mid-market player is not a startup building a competing tool. It is an adjacent platform adding project management as a feature. When a CRM, a communication tool, or a document platform adds workflow and project tracking, it enters the category without needing to win on standalone product merit. It wins on integration and existing customer relationships.

I have watched this dynamic play out in several categories. A client in the marketing technology space spent three years building a best-in-class tool in their niche, only to find that a larger platform had added comparable functionality as a bundled feature. The standalone product did not disappear overnight, but the growth trajectory changed sharply. The threat was not a new entrant in the traditional sense. It was a horizontal expansion by an incumbent in an adjacent category.

Rating for this business: Moderate to high. Low barriers to building, but high barriers to distribution and trust at the mid-market level. The greater risk is platform expansion by adjacent players.

Force 3: Threat of Substitutes

This is the force most teams underestimate, because they define substitutes too narrowly. A substitute is not just a competing product in the same category. It is anything that solves the same underlying problem.

For a project management tool, the substitutes include: spreadsheets, email threads, shared documents, whiteboards, and the judgment of an experienced project manager who runs everything from memory and habit. These are not glamorous alternatives, but they are real ones. A significant proportion of the addressable market is not choosing between competing SaaS tools. It is choosing between a SaaS tool and doing nothing differently.

The marketing implication here is significant. If a large portion of your potential market is not comparing you to competitors but comparing you to their current behaviour, your messaging needs to address that. The case for change comes before the case for your product. This is why content that teaches, rather than content that sells, tends to perform well in categories with high substitute threat. Teaching as a marketing strategy is particularly well suited to markets where the primary competition is inertia.

Rating for this business: High. The category competes not only with direct alternatives but with deeply embedded manual processes and existing tool combinations.

Force 4: Supplier Power

In a SaaS context, supplier power is often the least immediately relevant force for marketers, but it is worth working through. Suppliers to a software business include cloud infrastructure providers, payment processors, integration partners, and talent.

Cloud infrastructure is highly concentrated. A small number of providers control the majority of the market. In practice, most SaaS businesses have limited negotiating power with their infrastructure suppliers, particularly at mid-market scale. This is a structural cost constraint that affects pricing strategy and therefore margin, which in turn affects how much can be invested in customer acquisition.

Talent is a more variable supplier dynamic. In periods of high demand for software engineers, supplier power shifts significantly toward candidates. This affects product velocity, which affects competitive positioning. It is not a direct marketing variable, but it is a constraint on the rate at which product-led growth strategies can be executed.

Rating for this business: Moderate. Infrastructure costs are a structural constraint. Talent market conditions are cyclical. Neither is an acute threat, but both cap the business’s room to manoeuvre on pricing and product investment.

Force 5: Buyer Power

This is where the analysis gets most directly useful for marketing strategy. Buyer power in mid-market B2B SaaS is shaped by several factors: the availability of alternatives, the cost and friction of switching, the size and sophistication of the buying organisation, and the proportion of the buyer’s budget that the purchase represents.

In project management software, buyers have significant power. There are many credible alternatives. Free trials are standard. Switching costs are moderate rather than high, because data portability has improved and most tools have developed import functionality. Procurement involvement at the mid-market level is increasing, particularly for tools that touch multiple teams.

The marketing response to high buyer power is to increase switching costs through means other than product lock-in. Deep integrations, certified training programmes, account-specific configurations, and community membership all raise the cost of leaving without requiring the buyer to feel trapped. The goal is to make staying the path of least resistance, not to make leaving impossible.

There is also a demand generation implication. When buyers have high power and low switching costs, acquisition marketing tends to be expensive because competitors can easily match offers and buyers can easily trial alternatives. The more efficient strategy is often to invest in retention and expansion within existing accounts, where the relationship and data advantage compounds over time. Forrester’s research on sales productivity points to a related dynamic: the cost of acquiring new customers consistently outpaces the cost of growing existing ones.

Rating for this business: High. Buyers are informed, alternatives are plentiful, and switching costs are moderate. This is the single most important force shaping the commercial model.

How Do You Synthesise the Five Forces Into a Strategic View?

Running through each force produces a set of ratings, but the value is in the synthesis. What do the forces, taken together, tell you about the structural position of the business?

For this example business: high rivalry, moderate to high new entrant threat, high substitute threat, moderate supplier power, high buyer power. That is a structurally challenging position. The category is not inherently attractive from a Porter perspective. Margins will be under pressure. Customer acquisition costs will be high. Retention will be harder than in a category with stronger lock-in.

That does not mean the business cannot succeed. It means the strategy needs to account for these structural realities rather than pretend they do not exist. A business in this position needs to be very clear about its defensible differentiation, very disciplined about the customer segments it targets, and very honest about the unit economics of its acquisition model.

When I was judging the Effie Awards, one of the things that consistently separated shortlisted work from the rest was strategic clarity about the market context. The campaigns that worked were not just creative. They were built on an honest reading of the competitive environment. Five Forces is one of the cleaner ways to arrive at that reading.

The synthesis should produce three to five specific strategic implications, not a general statement about the competitive landscape. For this business, those implications might be: invest in integration depth to raise switching costs, focus acquisition spend on segments where the substitute threat is lowest, build content that addresses the inertia problem rather than just the feature comparison, and price to reflect the value of onboarding and support rather than competing on headline cost.

What Are the Limits of the Framework?

Porter’s Five Forces is a structural analysis. It describes the forces that shape competition in a market at a point in time. It does not tell you how fast those forces are changing, and in technology categories, the pace of change matters enormously.

The framework also does not account well for network effects, platform dynamics, or the role of data as a competitive asset. These are increasingly important in digital categories. A business with strong network effects can sustain a position that Five Forces analysis would suggest is structurally weak, because the network itself creates a barrier that the framework does not fully capture.

There is also a tendency to treat the analysis as a scoring exercise rather than a thinking exercise. I have seen teams spend significant time debating whether buyer power is a 3 or a 4 on a five-point scale, when the more useful question is: what are the specific mechanisms through which buyer power is expressed in this market, and what can we do about them? The numbers are a communication device. The thinking is the point.

Used alongside other tools, including search intelligence, customer research, and behavioural data, Five Forces gives you a structural frame for interpreting what you observe. It does not replace the observation. If you are building out a broader competitive intelligence programme, the Market Research and Competitive Intel hub covers the full range of methods and tools that complement this kind of structural analysis.

How Often Should You Run a Five Forces Analysis?

Once is better than never. Annually is better than once. The most useful version of this exercise is not a one-time strategy document. It is a consistent annual review against a stable set of criteria, so you can track how the forces are shifting over time.

In practice, most businesses do this kind of structural analysis when they are preparing a new strategy or responding to a specific threat. That is understandable, but it means the analysis is reactive rather than anticipatory. Running it annually, even as a two-hour workshop rather than a formal document, builds the habit of thinking structurally about the market before a crisis forces the conversation.

The trigger for an unscheduled review is usually one of three things: a significant new entrant, a pricing move by a major competitor, or a shift in buyer behaviour that cannot be explained by normal variation. Any of these should prompt a fresh look at the forces, because they are often signals that the structural dynamics of the category are changing.

Early in my career, I learned that the most dangerous competitive moves are the ones you see coming but do not take seriously. A Five Forces review done annually creates a standing record of what you knew and when. That accountability is useful. It stops the revisionist narrative that no one could have seen the shift coming, when in fact the signals were visible and the analysis was not done.

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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