Porter's Five Forces

Porter's Five Forces is a model for analysing the structure of an industry and, from that structure, how much profit a company operating in it can reasonably expect to earn. Rather than looking only at direct rivals, it argues that five distinct forces shape competition and therefore returns: the intensity of rivalry among existing competitors, the threat of new entrants, the threat of substitute products or services, the bargaining power of buyers, and the bargaining power of suppliers.

The insight is that profitability is largely determined by industry structure, not just by how well any single firm executes. An industry where entry is easy, buyers can switch costlessly, and substitutes are plentiful will compete margins toward zero no matter how good the individual players are. An industry protected by high barriers, differentiated products, and captive buyers can sustain healthy margins for years.

In practice, teams use the Five Forces to decide which markets to enter, where to build defences, and which competitive threats to watch most closely. It is a structural lens — a snapshot of the board — that pairs naturally with movement-based intelligence about what specific competitors are doing right now.