foxex: What are 'Porter's Five Forces'?

Saturday, June 22, 2019

What are 'Porter's Five Forces'?

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths. Frequently used to identify an industry's structure to determine corporate strategy, Porter's model can be applied to any segment of the economy to search for profitability and attractiveness.

Related to "Porter's 5 Forces"

Porter's 5 Forces vs. SWOT Analysis: What's the Difference?

Each of the models seeks to define the company's position in the market. Porter's 5 Forces are generally more of a micro tool, while SWOT analysis is comparatively macro.

Porter's 5 Forces vs. PESTLE Analysis: What's the Difference?

Porter's 5 Forces examines where power lies in a competitive situation, while PESTLE identifies how various macro-environmental factors may affect an organization and its competitive standing.

The Pitfalls of Porter's 5 Forces

Porter's five forces are a staple of business schools everywhere, but there are some common pitfalls you should watch out for.

Related Definitions

Strength, Weakness, Opportunity, and Threat (SWOT) Analysis

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company's competitive position and to develop strategic planning.

Qualitative Analysis

Qualitative analysis uses subjective judgment based on non-quantifiable information, such as management expertise, industry cycles and labor relations.

Horizontal Integration

Horizontal integration is the acquisition of a business operating at the same level of the value chain in similar or different industries.

Value Chain

A value chain is a tool that analyzes all of the activities that a business employs in order to create a product or service. For companies that produce goods, a value chain comprises the steps that involve bringing a product from conception to distribution, and everything in between.