Porter's 5 Forces

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DEFINITION of 'Porter's 5 Forces'

Named after Michael E. Porter, this model identifies and analyzes 5 competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths.

1. Competition in the industry
2. Potential of new entrants into industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products

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INVESTOPEDIA EXPLAINS 'Porter's 5 Forces'

Frequently used to identify an industry's structure in order to determine corporate strategy, Porter's model can be applied to any segment of the economy to search for profitability and attractiveness.

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RELATED FAQS
  1. Besides Porter's 5 forces, what other forces shape industry in the 21st century?

    Competition, potential new competition, supplier power, buyer power and the threat of new substitute products, also known ... Read Full Answer >>
  2. What's the difference between Porter's 5 forces and PESTLE analysis?

    Porter's Five Forces and PESTLE analysis are two sets of business tools for analyzing situations and helping companies to ... Read Full Answer >>
  3. Who uses Porter's 5 forces analysis?

    Anyone who makes decisions about a company's bottom line can implement Porter's five forces analysis, which is a metric for ... Read Full Answer >>
  4. Which of these is not one of Porter's 5 competitive forces?

    Which of these is not one of Porter's 5 competitive forces? a) Threat if new entrantsb) Threat of subsitute goodsc) Rivalry ... Read Full Answer >>
  5. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

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