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Submitted by bob316 on March 3, 2008
Category: Business
Words: 10228 | Pages: 41
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The Five Competitive Forces That Shape Strategy
Awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more
profitable and less vulnerable to attack.
by Michael E. Porter
Harvard Business Review (HBR), January 2008.
Editor’s Note: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist
and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In
subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations,
regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic
research and business practice. With prodding and assistance from Harvard Business School Professor Jan Rivkin and
longtime colleague Joan Magretta, Porter here reaffirms, updates, and extends the classic work. He also addresses common
misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for
strategy today.
In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition
too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established
industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute
products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of
competitive interaction within an industry.
As different from one another as industries might appear on the surface, the underlying drivers of profitability are the same.
The global auto industry, for instance,...
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