Porters 5
...Department of Agricultural Economics
Kathleen Erickson, Erickson Communications
Sally Linton
Department of Food Science
Overview
Assessing Your Marketplace
The economic structure of an industry is not an accident.
Its complexities are the result of long-term social trends and
economic forces. But its effects on you as a business manager
are immediate because it determines the competitive rules
and strategies you are likely to use. Learning about that
structure will provide essential insight for your business
strategy.
Michael Porter has identified five forces that are widely used to
assess the structure of any industry. Porter’s five forces are the:
• Bargaining power of suppliers,
• Bargaining power of buyers,
• Threat of new entrants,
• Threat of substitutes, and
• Rivalry among competitors.
Together, the strength of the five forces determines the profit
potential in an industry by influencing the prices, costs, and
required investments of businesses—the elements of return
on investment. Stronger forces are associated with a more
challenging business environment. To identify the important
structural features of your industry via the five forces, you
conduct an industry analysis that answers the question,
“What are the key factors for competitive success?”
Using This Publication
This publication describes five forces that influence an
industry. The publication includes a set of application
questions that will help you evaluate the structure of the
industry you are in or are considering entering. The more you
understand about the strength of each force, the better able
you will be to respond.
The forces affecting profitability are often beyond your
control, so you must choose tactics to respond to the forces
rather than try to change the business environment. This
publication offers insight on specific tactics you need for...
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