cmp13uf001PORTER’S COMPETITIVE FORCES

Application: Competitive Analysis, Market Analysis, Strategy Development

Figure P.2: A representation of Porter’s five forces of competitive intensity

(see Porter, M.E., 1990)

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The Concept

Harvard’s Michael Porter is one of the most influential strategy professors living today. Amongst his impressive and prodigious work on competitive strategy he offered a powerful conceptual framework (Porter, M., 1995) which works well as part of the market analysis and strategy development process. His “five forces” of competition are a useful checklist for marketers to work through when analysing a market. They are:

  • The power of buyers. Buyers can influence a market by forcing down prices, by demanding higher service and quality, or by playing competitors off against each other. Porter suggested that there are a number of circumstances when a buyer group is powerful including: if they are concentrated, if buying commodities or components, if driven to get price cuts, or if the purchase is unimportant to them.
  • The power of suppliers. Suppliers can exert power in a market by raising prices or reducing the quality of the offer. They can squeeze profitability out of the industry. They are powerful if: there are only a few, they have unique offers, are not obliged to ...

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