Porter’s Five Forces: What Most Strategists Miss

Porter’s Five Forces is one of the most widely taught frameworks in business strategy, and one of the most superficially applied. The model, developed by Michael Porter, maps the five competitive pressures that determine how attractive an industry is and where power actually sits: rivalry among existing competitors, the threat of new entrants, the threat of substitutes, the bargaining power of buyers, and the bargaining power of suppliers. Understanding all five, and how they interact, is the foundation of any serious competitive analysis.

Most strategy decks I have reviewed over the years tick the boxes and move on. They list the forces, assign a rough rating of high or low, and treat the exercise as complete. That is the wrong approach. The value of the framework is not in the taxonomy. It is in the pressure testing it forces you to do before you commit budget, headcount, or positioning to a direction that the market will resist.

Competitive analysis is a discipline that rewards rigour. If you want to build the habit of thinking this way across your marketing function, the Market Research and Competitive Intel hub on The Marketing Juice covers the methods, frameworks, and practical approaches that connect research to commercial decision-making.

Why Porter’s Five Forces Still Matters in 2026

There is a recurring impulse in marketing to declare old frameworks obsolete. I have heard the “Porter is dead” argument at conferences, in agency pitches, and from consultants who have something newer to sell. The argument usually rests on the idea that digital markets move too fast for a model developed in 1979.

The counterargument is simple: the forces themselves have not changed. What has changed is the speed at which they move and the channels through which they operate. New entrants can now appear globally overnight. Buyer power has increased dramatically because price comparison is frictionless. Substitutes emerge from adjacent categories rather than direct competitors. The model is not less relevant. It is more urgent.

When I was running an agency and we were pitching for a significant retained account in a category we did not know well, the first thing I would do is run a Five Forces analysis before we even touched a creative brief or a media plan. Not because I wanted to impress the client with strategic theatre, but because it told us where the real constraints were. If supplier power was high in that category, the client’s margin pressure was a strategic fact we needed to plan around. If buyer switching costs were low, brand loyalty was structurally weak regardless of how good the creative was. Those are things you need to know before you open a spreadsheet.

Force One: Competitive Rivalry

Competitive rivalry describes the intensity of competition among existing players in a market. It is the force most marketers focus on because it is the most visible. But intensity is not just about how many competitors exist. It is about how the market is structured.

High rivalry tends to occur when the market is fragmented, products are undifferentiated, fixed costs are high, and exit barriers prevent weak players from leaving. In those conditions, price competition becomes the default weapon, and margin erodes across the board. Low rivalry tends to occur when there are few players, switching costs are high, or products are sufficiently differentiated that direct comparison becomes difficult.

The marketing implication is direct. In a high-rivalry market, brand differentiation is not a nice-to-have. It is the only structural defence against commoditisation. I have worked across more than 30 industries in my career, and the clients who struggled most were consistently the ones operating in fragmented markets who had convinced themselves that a better product would win without investing in brand. The product might have been better. But in a crowded, undifferentiated market, no one had enough context to believe it.

Rivalry also changes over time. A market that looks stable can tip into intense competition quickly when a new entrant drops price to buy share, or when overcapacity builds after a period of growth. Monitoring the structural conditions, not just the current competitive set, is what separates reactive strategy from forward-looking strategy.

Force Two: The Threat of New Entrants

New entrants bring fresh capacity and the motivation to gain share, often through pricing aggression or product innovation. The degree of threat depends on how high the barriers to entry are. High barriers, such as significant capital requirements, regulatory hurdles, proprietary technology, or strong incumbent brand equity, reduce the threat. Low barriers invite disruption.

Digital channels have lowered barriers to entry in almost every consumer category. The cost of building a brand-to-consumer relationship has fallen. Distribution is no longer gated by shelf space. A well-funded challenger brand with a good product and a competent paid social strategy can build awareness and trial faster than would have been possible a decade ago.

I saw this firsthand at lastminute.com, where the speed at which a well-executed paid search campaign could generate commercial volume was genuinely striking. We launched a campaign for a music festival and saw six figures of revenue within roughly a day. That kind of speed-to-market changes the competitive calculus for incumbents. A new entrant does not need years to establish itself. It needs a decent product, a functional website, and a competent media plan.

For incumbents, the strategic response is to build switching costs and brand loyalty before the entrant arrives, not after. Reactive investment in brand after a challenger has gained a foothold is significantly more expensive than proactive investment in defensible positioning.

Force Three: The Threat of Substitutes

Substitutes are products or services that perform the same function as yours, even if they look nothing like you. This is the force that most strategy documents handle most poorly, because teams define it too narrowly. They list direct competitors rather than functional alternatives.

The right question is not “who else sells what we sell?” It is “what else solves the same problem for the customer?” A business travel management platform is not just competing with other travel management platforms. It is competing with the decision to let employees book their own travel on consumer sites, with the internal operations team handling it manually, and with the CFO deciding the category is not worth the spend at all. Those are all substitutes.

The threat of substitutes is highest when the substitute offers a better price-to-performance ratio, when switching costs are low, and when buyers are willing to accept some reduction in quality or features in exchange for simplicity or cost. Understanding where your category sits on that spectrum shapes how you position and price.

Marketers who have worked with BCG’s strategic frameworks will recognise the connection between substitute threat and the structural attractiveness of a market. When substitute pressure is high, the category often consolidates around a few differentiated players, with the undifferentiated middle squeezed out. That is not a trend. It is a structural outcome.

Force Four: Bargaining Power of Buyers

Buyer power refers to the ability of customers to drive prices down, demand better terms, or switch to a competitor without significant cost or friction. High buyer power compresses margins and forces suppliers to compete on price rather than value.

Buyer power is high when customers are concentrated (a small number of buyers represent a large share of revenue), when the product is undifferentiated, when switching costs are low, and when buyers have full price visibility. In B2B markets, a client who represents 30% of your agency’s revenue has enormous power. I have been on both sides of that dynamic, and it shapes every commercial decision you make, from pricing to staffing to how much you push back on scope creep.

The marketing response to high buyer power is differentiation and switching cost creation. If your product or service is genuinely distinct, comparison becomes harder. If your customer has invested time, data, or integration into your platform, switching becomes costly. Neither of those outcomes happens by accident. They require deliberate product and positioning decisions, not just good creative.

In consumer markets, buyer power has increased significantly because price transparency is now the default. Tools that aggregate pricing, review platforms that surface quality signals, and social channels that amplify negative experiences have shifted power toward the buyer in most categories. Brands that built loyalty on information asymmetry, where the customer simply did not know a better option existed, have had to adapt. The ones that built loyalty on genuine preference have held their ground.

Force Five: Bargaining Power of Suppliers

Supplier power is the mirror of buyer power. When suppliers are concentrated, offer differentiated inputs, or control something you cannot easily source elsewhere, they can extract margin from your business. When suppliers are fragmented and interchangeable, you hold the power.

In marketing, supplier dynamics show up in ways that are not always labelled as such. Platform dependency is a supplier power problem. If a significant portion of your customer acquisition runs through a single platform, that platform has leverage over your business. It can raise prices, change targeting parameters, or reduce organic reach, and your options are limited. I have watched agencies and clients build entire growth models on a single channel, only to find that when the platform changed its algorithm or its auction dynamics, the model broke.

The strategic response is diversification of supply, whether that means media channel diversification, technology vendor diversification, or talent pipeline diversification. None of those are free. But the cost of dependency, when it eventually surfaces, is usually higher. Teams building out their content and creative operations should think carefully about how creative team structure affects their ability to operate across multiple channels without being beholden to any single one.

Supplier power also shows up in talent markets. When specialist skills are scarce, the people who hold them have leverage. I grew an agency from around 20 people to over 100 during a period when digital marketing talent was in short supply. The teams that retained people were not always the ones paying the most. They were the ones offering the most interesting work and the clearest career structure. That is a supplier power response: reduce dependency on the open market by making your organisation somewhere people want to stay.

How the Five Forces Interact

The most common mistake in applying this framework is treating each force as independent. They are not. They interact constantly, and a shift in one force typically creates pressure across several others.

A new entrant who drops price to buy market share increases competitive rivalry, reduces buyer switching costs, and may trigger a response from incumbents that changes supplier dynamics. A technology shift that reduces the cost of production can lower barriers to entry, increase substitute threat, and shift buyer power simultaneously. The framework is most useful when you map the interactions, not just the individual forces.

This is where the exercise of building a Five Forces analysis with a cross-functional team pays dividends that a solo desk exercise does not. Finance will see supplier and buyer power dynamics that marketing misses. Operations will see barriers to entry that strategy overlooks. The framework is a structured conversation as much as it is an analytical output.

When I judged the Effie Awards, one of the things that separated the strongest entries from the technically competent ones was the evidence that the team had understood the structural context before developing the strategy. The best work was not just creative. It was positioned against a real competitive constraint, and the results reflected that precision. The framework does not write the strategy, but it creates the conditions in which good strategy becomes possible.

Applying the Framework to Marketing Strategy

The Five Forces framework is often treated as a corporate strategy tool that sits above marketing. That is a mistake. The forces directly shape what marketing can and cannot achieve.

In a high-rivalry, low-differentiation market, performance marketing captures existing demand efficiently but does little to expand the category or build preference. The marginal return on paid search diminishes as competitors bid on the same terms. Brand investment that builds mental availability and preference becomes the more defensible long-term allocation. Teams using tools like smart traffic optimisation to improve conversion rates are solving a real problem, but they are solving it within a competitive structure that the Five Forces analysis reveals.

In a market with high barriers to entry and strong incumbent brand equity, the marketing challenge is different. The risk is complacency. Brands that have operated in protected markets often underinvest in brand and innovation because the structural protection has masked the need for it. When the barriers eventually erode, which they do, the brand finds itself without the equity to compete.

Understanding where your market sits across all five forces tells you what role marketing can play, where it will be most effective, and where structural constraints will limit what even excellent execution can achieve. That is commercially grounded thinking. It is also the kind of thinking that makes marketing leadership credible in a boardroom conversation.

If you want to go deeper on the research and analytical methods that feed into frameworks like this, the Market Research and Competitive Intel hub covers primary research, competitor analysis, and the practical tools that connect market intelligence to 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.

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