MSE: Entrepreneurship: Porter's Five Forces Analysis

The Five Forces Model is a tool that can be used to analyze the opportunities and overall competitive advantage of you, your organization, or your project. The five forces that can assist in determining the competitive intensity and potential attractiveness within a specific area. This can be developed to assist in analyzing a specific project and the strategic opportunities for this project, as well as the strategic opportunities, effectiveness and profitability of your organization as a whole

In 1979, a young associate professor at Harvard Business School published his first article for HBR, "How Competitive Forces Shape Strategy." In the years that followed, Michael Porter's explication of the five forces that determine the long-run profitability of any industry has shaped a generation of academic research and business practice. In this article, Porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, including substantial new sections.

This article discusses the nature and degree of competition in industry. The essence of strategy formulation is coping with competition. Competition in an industry is rooted in its underlying economics. The state of competition in an industry depends on five basic forces: the threat of new entrants, the bargaining power of customers, the threat of substitute products or services, the bargaining power of suppliers, and the battle of industry players for position among current competitors.