Porter's 5 forces

Porter's 5 forces is a framework created by Harvard professor Michael Porter in 1979 to analyze industry competition. ****

It examines 5 factors that determine profitability:

• Competitive rivalry measures how intensely existing companies compete
• Supplier power shows whether vendors can dictate terms
• Buyer power indicates if customers can demand lower prices
• Threat of substitutes warns when alternative solutions could replace you
• Threat of new entrants assesses how easily competitors can enter your market^[1]

Each force is rated from low to high. Industries where all 5 forces are weak (like software) tend to be highly profitable. Industries with strong forces (like airlines) struggle with thin margins. By understanding these dynamics, you can develop strategies to weaken the forces working against you.