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Porter’s Five Forces That Shape Strategy. 850k views

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Porter’s Five Forces.  Business Strategy and Execution.

Porter’s Five Forces is a framework developed by Michael Porter in 1979 that helps businesses analyze the attractiveness of an industry by considering five key forces that affect competition:

  1. Threat of new entrants: This force looks at how easy or difficult it is for new companies to enter the industry. If it is easy for new companies to enter the market, the industry will be more competitive.
  2. Threat of substitute products or services: This force looks at the availability of substitute products or services that consumers may switch to if the price of the original product or service increases.
  3. Bargaining power of customers: This force looks at the ability of customers to negotiate lower prices or demand higher quality products or services. If customers have a lot of bargaining power, it can drive down prices and profit margins for companies in the industry.
  4. Bargaining power of suppliers: This force looks at the ability of suppliers to negotiate higher prices for their products or services. If suppliers have a lot of bargaining power, it can increase costs for companies in the industry.
  5. Rivalry among existing competitors: This force looks at the intensity of competition among existing companies in the industry. If there is a lot of rivalry, companies may need to lower prices or invest in marketing and product development in order to stay competitive.

By analyzing these five forces, businesses can better understand the competitive landscape of their industry and develop strategies to address the forces that are most impactful to their business. For example, a company may decide to focus on differentiation in order to reduce the threat of substitute products or services, or it may decide to invest in building strong relationships with suppliers to reduce their bargaining power.

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Business Strategy Quotes

  • “As a multisport athlete, I was always fascinated with competition and how to win. At HBS and later at the Harvard Department of Economics, I was drawn to the field of competition and strategy because it tackles perhaps the most basic question in both business management and industrial economics: What determines corporate performance?”  ~ Michael Porter
  • “In a period of economic downturn, the overwhelming instinct is to pare back, cut costs, and lay off. If you do that, do so with your strategy in mind. The worst mistake is to cut across the board. Instead, reconnect and recommit to a clear strategy that will distinguish yourself from others.”  ~ Michael Porter
  • “There is nothing so useless as doing efficiently that which should not be done at all.”  ~ Peter Drucker
  • “However beautiful the strategy, you should occasionally look at the results.”  ~ Winston Churchill
  • “If you can’t describe your strategy in twenty minutes, simply and in plain language, you haven’t got a plan. ‘But,’ people may say, ‘I’ve got a complex strategy. It can’t be reduced to a page.’ That’s nonsense. That’s not a complex strategy. It’s a complex thought about the strategy.”    ~ Larry Bossidy
  • “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”  ~ Sun Tzu
  • “Persistence is what makes the impossible possible, the possible likely, and the likely definite” ~ Robert Half
  • “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”  ~ Jack Welch, former CEO GE

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