PORTER FIVE FORCES

Porter's Five Forces Model

The five forces model developed by Michael E. Porter guides the analysis of organization's environment and the attractiveness of the industry. The five forces include the risk of new competitors entering the industry, threat of potential substitutes, the bargaining power of buyers, the bargaining power of suppliers, and degree of rivalry between the existing competitors (Porter, 1985). Environmental scan identifies external opportunities and threats, evaluates industry's overall attractiveness, and identifies factors contributing to, or taking away from, the industry attractiveness. Through organization's choice of strategy it can alter the impact of these forces to its advantage.

This is a graphical interpretation of Porter's five forces model (Porter, 1985, p. 5):

SUPPLIERS




		Bargaining Power of Suppliers

POTENTIAL
ENTRANTS


	Threat of new Entrants

INDUSTRY
COMPETITORS

Rivalry among
Existing Firms

Bargaining
Power of
Buyers

BUYERS

Threat of
Substitutes

SUBSTITUTES

Books, Articles

Strategy: Seeking and Securing Competitive Advantage (1991), Cynthia A. Montgomery, Michael E. Porter, Harvard Business Review Book
Economics of Strategy (1996), David Besanko, David Dranove, Mark Shanley, John Wiley & Sons, Inc., pp. 253-274
Marketing Management: Analysis, Planning, Implementation, and Control (1997), Philip Kotler, pp. 228-246
Competitive Strategy: Techniques for Analyzing Industries and Competitors (1980). Michael Porter. Free Press
“What Is Strategy?” (Nov-Dec 1996). Michael E. Porter. Harvard Business Review, pp. 61-78.