Porter's Five Forces Framework

Porter's Five Forces Framework is a model used to analyze the competitive environment in which a business operates and to determine its level of competitiveness.

At a very high level, the Porter's Five Forces Framework is used in the context of business.

Porter's Five Forces Framework quadrant descriptions, including examples
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What is the Porter's Five Forces Framework?

A visual explanation is shown in the image above. The Porter's Five Forces Framework can be described as a matrix with the following quadrants:

  1. Threat of New Entrants: The threat of new entrants refers to the ease with which new competitors can enter the market. For example, the barriers to entry such as regulation, economies of scale, and capital requirements.
  2. Bargaining Power of Buyers: The bargaining power of buyers refers to the ability of customers to negotiate lower prices or better terms. For example, customers with many options or those who purchase in large volumes.
  3. Bargaining Power of Suppliers: The bargaining power of suppliers refers to the ability of suppliers to negotiate higher prices or better terms. For example, suppliers with few options or those who supply a critical component.
  4. Threat of Substitute Products & Competitive Rivalry: The threat of substitute products refers to the availability of similar products that can be used as a replacement. Competitive rivalry refers to the intensity of competition in the market. For example, the number of competitors and their relative market shares.

What is the purpose of the Porter's Five Forces Framework?

Porter's Five Forces Framework is a model used to analyze the competitive environment in which a business operates. The framework was created by Michael Porter and was first published in 1979 in the Harvard Business Review. It is used to determine a company's level of competitiveness and to identify the factors that shape the competitive environment. The model consists of five forces that determine the overall level of competitiveness in a market: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products, and competitive rivalry.

The five forces are often presented in a 2x2 matrix, with the horizontal axis representing the five forces and the vertical axis representing the level of competitiveness of each force. By analyzing each of the five forces, companies can determine the overall level of competitiveness in their market and take appropriate actions to increase their competitiveness.


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What templates are related to Porter's Five Forces Framework?

The following templates can also be categorized as business and are therefore related to Porter's Five Forces Framework: AIDA Marketing Matrix, Affiliate Marketing Matrix, Agile Capability-Value Alignment Matrix, Agile Scaling Matrix, Ansoff Matrix, Asset Allocation Matrix, BCG Matrix, Brand Affinity Matrix. You can browse them using the menu above.

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