Analysis Without Paralysis: 10 Tools to Make Better Strategic Decisions

Chapter 6. Five Forces Industry Analysis

Description and Purpose

The Five Forces Industry Analysis, developed by Michael Porter,^[1] is designed to give you an understanding of an industry and its participants. The purpose of industry analysis is to analyze the economic and market forces that will ultimately influence an industry’s profit potential. Identifying the profit potential or “attractiveness” of an industry provides the foundation for bridging the gap between your firm’s external environment and its internal resources.

Porter classifies the five forces or “rules of industry competition” as follows:

1. Threat of new entrants

2. Bargaining power of suppliers

3. Bargaining power of buyers

4. Threat of substitute products or services

5. Degree of ...