Design thinking resource
Michael Porter’s structured framework for examining the competitive forces that influence an industry and its potential profitability.
Porter’s Five Forces was developed by Harvard Business School professor and economist Michael Porter. It provides a structured way to examine the dynamics shaping competition within an industry.
The framework proposes that profitability is influenced by supplier power, buyer power, new entrants, substitutes and rivalry among existing competitors.
Supplier power increases when alternatives are limited, inputs are distinctive or suppliers are important to the buyer’s operations. Strong suppliers may raise prices, impose terms or restrict availability.
Buyer power is shaped by purchasing volume, switching options and price sensitivity. The threat of new entrants depends on barriers such as capital requirements, economies of scale and access to distribution.
Substitutes meet a similar customer need through a different product or service. Attractive substitutes can reduce demand and force organisations to differentiate beyond price.
Competitive rivalry reflects the number and strength of existing players, industry growth, market share, differentiation and exit barriers. Intense rivalry can produce price pressure, higher marketing costs and reduced margins.
Put the method to work
Assess suppliers’ ability to influence price, terms, quality and access to important inputs.
Examine customers’ ability to switch, negotiate and demand greater value.
Consider how easily new competitors can enter and challenge established businesses.
Identify alternative products or services capable of meeting the same underlying need.
Evaluate competition among existing players and the pressure it places on price, innovation and profit.
Why it matters
See how several forces combine to shape the attractiveness of a market.
Identify areas where changing conditions or weaker forces create strategic space.
Anticipate pressures from competitors, suppliers, buyers and alternative offerings.
Develop a response grounded in the realities of competition rather than internal assumptions alone.
Continue exploring
Place this method back within the broader 5E Design Thinking Framework and continue developing your understanding.