porters-five-forces

name: porters-five-forcesdescription: >  Porter's Five Forces — analyze the competitive intensity and  attractiveness of an industry. Use when evaluating a new market entry,  diagnosing margin pressure, designing a defensive strategy, or auditing  industry-level positioning.license: MIT + Commons Clausemetadata:   version: 1.0.0  author: borghei  category: project-management  domain: strategy-frameworks  updated: 2026-05-27  python-tools: five_forces_scorer.py  tech-stack: porters-five-forces, industry-analysis, competitive-strategy  tags:     - porters-five-forces    - industry-analysis    - competition    - market-entry

Porter's Five Forces

Michael Porter's framework for analyzing the structural attractiveness of an industry. Reveals where profit pools form, why some markets are chronically unprofitable, and where strategic positioning has leverage.

When to use this skill

• Market entry decision (which industry to play in)
• Diagnosing chronic margin pressure (why are we squeezed?)
• Strategic positioning (where to invest, where to defend)
• Competitive response planning
• M&A target evaluation (industry attractiveness)
• Pre-fundraise industry framing

The 5 forces

1. Threat of new entrants — how easily can newcomers join?
2. Bargaining power of suppliers — how concentrated/critical are inputs?
3. Bargaining power of buyers — how concentrated/price-sensitive are customers?
4. Threat of substitute products — what alternatives could replace the category?
5. Competitive rivalry — how intense is competition between existing players?

Plus (Porter's later addition): 6. Complementors (the "sixth force") — do partners increase total industry value?

Scoring rubric

Each force is rated low / medium / high based on specific factors:

1. Threat of new entrants — high when:

• Low capital requirements
• No regulatory barriers
• No proprietary tech / patents
• Low switching costs
• No economies of scale
• No brand loyalty
• Access to distribution is easy
• Network effects absent

2. Supplier power — high when:

• Few suppliers / concentrated supply base
• Suppliers are critical / cannot be substituted
• Switching cost is high
• Suppliers can forward-integrate
• Industry is not a large customer for supplier

3. Buyer power — high when:

• Few buyers / concentrated demand
• Buyers purchase in large volumes
• Product is undifferentiated
• Switching cost is low
• Buyers can backward-integrate
• Buyers have full information
• Buyers face thin margins (price pressure)

4. Threat of substitutes — high when:

• Many substitutes exist
• Substitutes have favorable price-performance
• Switching cost to substitute is low
• Buyer propensity to substitute is high
• Substitute industry is growing fast

5. Competitive rivalry — high when:

• Many similar-sized competitors
• Low growth industry (zero-sum)
• High fixed costs (drive volume)
• Low differentiation
• High exit barriers
• Strategic stakes high

Clarify First

Before scoring the forces, settle the inputs below. When one is missing or vague and would change the result, ask about it; when it wouldn't, use a sensible default and say which one you used.

• Precise industry definition: narrow enough to be specific, broad enough to catch substitutes (too broad/narrow is the #1 error and sets the entire analysis scope).
• Evidence per force: the data/facts behind each low/medium/high rating (a score without evidence is just opinion).
• Purpose: market entry / margin-pressure diagnosis / positioning audit (frames which dominant force matters and the strategy translation; margin diagnosis also needs a then-vs-now comparison).

Ask about the two or three inputs that matter most for this request, not the whole list. If the user wants a result straight away, produce it and state your assumptions at the top.

Workflow

Step 1 — Define the industry

Industry definition is the most-frequent source of error.

• "Software" is too broad
• "B2B SaaS" is too broad
• "Mid-market HR analytics SaaS" is workable
• "Enterprise revenue intelligence tools (Gong, Outreach, Salesloft-tier)" is precise

Step 2 — Score each force

Use the rubric. Each force gets low / medium / high + evidence.

Step 3 — Identify the dominant force(s)

Usually 1-2 forces dominate. They drive the industry's profit pool.

Step 4 — Translate to strategy

Each force suggests strategic moves:

Step 5 — Run five_forces_scorer.py

Audit for: missing evidence, generic factors, missed sub-factors, no strategy implications drawn.

python3 project-management/strategy-frameworks/porters-five-forces/scripts/five_forces_scorer.py \
  --input forces.json --format markdown

Common engagements

"Should we enter market X?"

1. Define X precisely.
2. Score each force.
3. Identify dominant force.
4. Assess: can we differentiate against the dominant force?
5. If yes, structure entry to counter that force; if no, don't enter.

"Why are our margins under pressure?"

1. Score industry today vs 3-5 years ago.
2. Identify the force(s) that shifted (usually buyer power or rivalry).
3. Identify which factor specifically caused the shift.
4. Address: product differentiation, switching cost, customer concentration, etc.

"Audit our strategic position"

1. Score industry forces.
2. For each high force, identify how we currently counter it.
3. Identify weak counters; recommend reinforcement.

Anti-patterns to avoid

• Industry defined too broadly. Yields generic analysis.
• Industry defined too narrowly. Misses substitute threats.
• Each force = "medium". No analysis happened.
• No evidence cited. Just opinion.
• No strategy implications. Just a score; not actionable.
• Static analysis. Industries evolve; refresh every 12-18 months.
• Mixing internal capabilities with industry analysis. Five Forces is industry-level; capabilities are firm-level (see SWOT).

Scope & Limitations

In Scope:

• Industry analysis across Porter's five forces: new entrants, supplier power, buyer power, substitutes and competitive rivalry, plus complementors as an optional sixth force
• A low, medium or high rating per force from a factor rubric, with evidence
• Identifying the one or two dominant forces and translating each high force into strategic moves
• A scorer that flags missing evidence, generic factors, missed sub-factors and absent strategy implications (five_forces_scorer.py)
• Market entry, margin pressure and strategic position engagements

Out of Scope:

• Firm-level strengths and weaknesses (see project-management/strategy-frameworks/swot-analysis/)
• Choosing among growth bets (see project-management/strategy-frameworks/ansoff-matrix/)
• Teardowns of individual competitors (see business-growth/competitive-teardown/)
• Market sizing and primary market research (see research-ops/market-research/)

Important Caveats:

• five_forces_scorer.py reads a hand-written JSON file. Intensity ratings, factors and evidence come from the user, and the tool pulls in no market data.
• The analysis is only as sound as the industry definition. Too broad gives generic results, and too narrow misses substitutes.
• Ratings are judgments. Without cited evidence they are opinion.
• Industries change. The skill recommends a refresh every 12-18 months.

References

• references/five-forces-deep.md — each force, factors, examples
• references/five-forces-and-strategy.md — translating to strategic moves

Related skills

• project-management/strategy-frameworks/swot-analysis — firm-level positioning
• project-management/strategy-frameworks/ansoff-matrix — growth options
• project-management/strategy-frameworks/business-model-canvas — operational view
• business-growth/competitive-teardown — competitor-specific analysis
• c-level-advisor/ceo-advisor — strategic context