porters-five-forces-analyzer

name

porters-five-forces-analyzer

description

Performs a rigorous Porter's Five Forces analysis: industry structure, supplier power, buyer power, threat of new entrants, substitutes, and rivalry intensity, with quantified pressure scoring and a strategic-positioning recommendation. Use when entering a new market, defending an existing position, evaluating an industry's structural attractiveness, advising on Mergers and Acquisitions (M&A) in a new vertical, or preparing a competitive strategy memo.

Porter's Five Forces Analyzer

Industry-structure analysis that explains why some markets are profitable and others aren't.

What this skill is

A workflow that applies the Five Forces framework developed by Michael Porter with quantitative pressure scoring (1-5 per force) and the structural drivers behind each score. It surfaces the dominant force, identifies where the company can move the structure in its favor, and produces a positioning recommendation that goes beyond "the industry is attractive or unattractive."

What it solves

• Industry analysis that stops at "competition is intense" without identifying which force matters most
• Strategy memos that ignore supplier or buyer power
• Treating substitutes only as direct competitors (missing adjacent threats)
• Static analysis with no view on how forces are evolving
• Recommendations disconnected from the structural levers identified

When to invoke

• Entering a new vertical, geography, or product category
• Pre-Mergers and Acquisitions (M&A) diligence in an unfamiliar industry
• Defending current strategy when challenger dynamics shift
• Annual strategic plan industry-context refresh
• Board memo justifying a market exit or entry

Phase 1: Define the industry boundary

Industries are not obvious - and a bad boundary choice invalidates the analysis. Decide:

• Product or service scope - what's in, what's out (e.g., "Business-to-Business (B2B) fleet telematics" vs. "vehicle hardware")
• Geography - global, regional, country-specific
• Customer segment - enterprise versus small and medium business; consumer versus industrial
• Value chain stage - manufacturer, distributor, retailer, service provider

Different boundaries can produce different forces. Document the choice explicitly.

Phase 2: Force 1 - Supplier power

Score 1 (weak) to 5 (strong) and explain drivers:

Driver	Pushes power UP	Pushes power DOWN
Supplier concentration	Few, dominant suppliers	Many fragmented suppliers
Switching costs	High (proprietary inputs)	Low (commodity)
Forward integration threat	Credible	Not feasible
Importance of industry to supplier	Small customer for them	Large customer
Substitute inputs	None	Many viable
Differentiation of inputs	Highly differentiated	Commoditized

Cite specific suppliers when known (e.g., Taiwan Semiconductor Manufacturing Company (TSMC) for advanced silicon).

Phase 3: Force 2 - Buyer power

Driver	Pushes power UP	Pushes power DOWN
Buyer concentration	Few large buyers	Many small buyers
Switching costs	Low for buyer	High (lock-in, contracts)
Backward integration threat	Credible	Not feasible
Price sensitivity	Product is large percent of buyer's cost	Small share
Product differentiation	Commoditized	Highly differentiated
Buyer information	Full price transparency	Asymmetric

Sub-segment buyers - enterprise behaves differently from small and medium business.

Phase 4: Force 3 - Threat of new entrants

Barrier	High barrier	Low barrier
Economies of scale	Required	Not required
Capital requirements	Heavy	Light
Network effects	Strong	None
Switching costs for buyers	High	Low
Access to distribution	Locked up	Open
Brand and customer loyalty	Strong	Weak
Regulatory licenses	Required, scarce	None
Proprietary technology or data	Defensible	Replicable
Incumbent retaliation	Credible	Unlikely

Score the net entry barrier 1 (low → high entry threat) to 5 (high → low threat).

Phase 5: Force 4 - Threat of substitutes

Substitutes are alternative solutions to the same customer job - not direct competitors. Examples:

• Video conferencing → in-person meetings, asynchronous video, written documents
• Ride-sharing → public transit, walking, owning a car, working from home

Driver	Pushes threat UP	Pushes threat DOWN
Substitute price-performance	Improving	Degrading
Buyer propensity to substitute	High	Low (entrenched habits)
Cost of switching to substitute	Low	High

Map the performance trajectory of substitutes over the next 3-5 years.

Phase 6: Force 5 - Rivalry intensity

Driver	Higher rivalry	Lower rivalry
Competitor concentration	Many similarly-sized	Few, with clear leader
Industry growth	Slow or declining	Fast
Fixed costs or capacity	High (drives price competition)	Low
Product differentiation	Low	High
Exit barriers	High (forces stay-and-fight)	Low
Strategic stakes	High for multiple players	Low

Phase 7: Aggregate and dominant force

Force	Score (1-5)	Dominant drivers	Trajectory (3 years)
Supplier power	x		↑↓→
Buyer power	x		↑↓→
New entrants	x		↑↓→
Substitutes	x		↑↓→
Rivalry	x		↑↓→

Identify:

• Dominant force - the one most depressing industry profitability
• Industry attractiveness - sum scores; under 12 attractive, 12-18 moderate, over 18 difficult
• Direction of travel - net force pressure trajectory

Phase 8: Strategic implications

The point of the Five Forces is not just "what's the industry like?" but what to do about it. For each force, identify the strategic lever:

Force	Strategic moves
Supplier power	Vertically integrate, multi-source, build alternatives, build internal capability
Buyer power	Differentiate, raise switching costs, segment, build ecosystem
Entrants	Raise barriers (scale, network effects, intellectual property), pre-empt, M&A consolidation
Substitutes	Improve relative price-performance, redefine the job, partner with substitutes
Rivalry	Differentiate, segment, consolidate via M&A, signal credibly to discourage price wars

Output

• Five-force scorecard with drivers cited
• Industry boundary statement and trajectory of each force
• Dominant force identification and reasoning
• Industry attractiveness rating
• Strategic recommendation: where to invest to reshape the forces in your favor
• 3 leading indicators to monitor that would change the analysis

Operating rules

Always

• State the industry boundary explicitly
• Score each force on a 1-5 scale with drivers cited
• Identify the dominant force, not a generic "competition"
• Project a 3-year trajectory per force
• Translate analysis into specific strategic moves

Never

• Treat the Five Forces as a static one-time exercise
• Confuse substitutes with direct competitors
• Conflate industry attractiveness with company performance
• Skip the boundary definition
• Stop at description without recommending action