Porter’s Five Factors is a technique for determining an industry’s vulnerabilities and strengths by identifying and analyzing five competitive forces that drive every sector. A five-forces analysis is commonly used to establish a company strategy by identifying an industry’s structure.
Porter’s model may be used to understand the degree of competition within an industry and improve a company’s long-term profitability in any sector of the economy. Michael E. Porter, a Harvard Business School professor, is the creator of the Five Forces concept.
Porter’s five forces are:
-
Competition in the industry
-
Potential of new entrants into the industry
-
Power of suppliers
-
Power of customers
-
Threat of substitute products