Note: Porters five forces is an industry analysis framework that was developed by Michael Porter. It will help managers to develop an understanding of the nature of competition in their industry.

"Are you one step ahead of your competitors, suppliers and customers? - you can be!"

For those of you who wish to further develop their strategic leadership capabilities, the following diagram indicates where porters five forces fits in with your discovering strategy journey.

Discovering the Five Forces in Porter's Model?

Michael Porter developed a framework identifying 5 forces that act to either increase or reduce the competitive nature of an industry.

What you will find is, the greater the competitive forces in your industry the more pressure you are likely to find on your prices. Whereas, the weaker the competitive forces in your industry the less pressure you are likely to have on your prices.

Note: Porters Five Forces will help you to analyze your industry, and will help you to determine what your competitors might do next and how successful they might be. What you do in response to this information is up to you and your creativity.

Click through for a detailed how to guide for each of porters five forces, or scroll down for a summary of each force.  

• The Bargaining Power of Your Customers
• The Threat of New Entrants into your Industry
• The Bargaining Power of Suppliers
• Threat of Substitute Products or Services 
• Rivalry Amongst Existing Firms 

The Bargaining Power of Your Customers

A strong or powerful customer can play you off against your competitors. Your strong customers may ask for higher quality or improved service at the same price or simply for a lower price. Where a less strong customer may simply try to bluff you

Learn how to determine how much bargaining power your customers really have, click here for your how to guide and free template!

The Threat of New Entrants to Your Industry

A new entrant or a new competitor to your industry may erode your market share, but how realistic is it that a new entrant will come along and steal your customers away?

Tip: Sometimes a new competitor in your area is a good thing. For example if you own a craft shop and four more open up near you, the collective scale of the five craft shops may attract significantly more people to the area and see your business grow.

You need to determine if a new entrant is a good or a bad thing for your business.

Learn how to analyze the threat of new entrants to your industry, click here for your how to guide and free template!

The Bargaining Power of Your Suppliers

A strong or powerful supplier can demand higher prices or ask you to accept lower quality. A weaker supplier may simply try to bluff you.

How much power do your suppliers have? Can they raise prices or reduce service without the fear of losing your business.

Note: The more powerful the suppliers to an industry, the less profitable the industry tends to be.

Learn how to complete an analysis of the power of suppliers to your industry, click here for your detailed how to guide and free template!  

The Threat of Substitute Products or Services

Are your suppliers likely to find an alternative product or service to use instead of your product or service?  Will substitute products or services erode your profits?

Example: Some builders are substituting steel frames for timber frames when building a new house. Steel frames are a substitute product in the housing industry and a cause for some concern with timber mills who produce the timber for timber frames.

Learn how to assess the threat of substitute products and services to your industry, click here for your how to guide and free template!

Rivalry Among Existing Firms

Is one of your competitors thinking about growing their business? If so will you loose business? Will they steal your customers away?

Your existing competitors may try to compete for an improved market position, now you can assess how effective their efforts might be.

Your existing competitors may compete for market position using;

• Reduced prices or increased price competition
• Increased advertising
• Differentiating based on customer service
• or, many other techniques 

Learn how to assess the rivalry amongst existing firms in your industry, click here for your how to guide and free template .

Porters Five Forces Wrap Up

What will happen if you did not use porters five forces to analyze your industry? Will your business become a laggard rather than an industry leader?

Why risk it? click through right now and spend ten minutes learning how to use this valuable tool, and start your porters five forces analysis today.

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If you love academia click through and read about porters five forces from Michael Porter