How many competitive forces are identified by Michael Porter?

Michael Porter identified five competitive forces that shape the competitive landscape within an industry. This framework, known as Porter’s Five Forces, provides a structured approach to analyzing the competitive dynamics and profitability potential of a business within its market environment. The five forces include:

1. The threat of new entrants: This force examines how easy or difficult it is for new competitors to enter the market and challenge existing companies.

2. The bargaining power of suppliers: This reviews how much power suppliers have over the prices of materials or services, which can affect profit margins for businesses.

3. The bargaining power of buyers: This force considers how much control customers have over pricing and terms, influencing profitability.

4. The threat of substitute products or services: This looks at the likelihood of customers finding alternative solutions that meet their needs, which can limit an industry’s profitability.

5. The intensity of competitive rivalry: This evaluates the nature and degree of competition among existing firms, affecting pricing, marketing strategies, and ultimately market share.

Understanding these forces enables companies to devise strategies that can strengthen their position and enhance competitiveness. The identification of these five forces has become a foundational concept in strategic management.