Porter's 5 Forces

Abstract

The Porter's Five Forces Model is a strategic analysis tool often used by companies to understand the profitability and structural underlying drivers of projects and to develop competitive strategies. These five forces are supplier power, buyer power, competitive rivalry, the threat of substitution, the threat of new entry. The goal of the model is to help identify the strengths and weaknesses of a project and then determine the structure and strategy. In a certain sense, competitive strategy derives from a deep understanding of the project's competitive landscape. In any industry or project, whether it is producing products or providing services, the law of competition can be reflected through these five forces. For project managers and operators, it is easy to get confused in project operation because of unknown reasons. This is an effective tool to find what really makes the industry profitable. Analyzing exactly which trends will have a big impact on the project, where the constraints are, and if those constraints can be relaxed, it may allow the company to find a really strong competitive position.

The analysis of the five forces model requires a certain knowledge background, but it is relatively easy to practice and apply. This tool can be applied from small-scale projects to large-scale industries. For project management, it is an effective tool to develop a competitive strategy in the market.

This article will explore how to use Porter’s Five Forces model to find the fundamental factors of project profitability, analyze the practical application of the model, and discuss the limitations of the model with critical thinking.

References

[1] Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), 213–229. https://doi.org/10.1002/jsc.764

[2] THE INVESTOPEDIA TEAM. (2020, Feb 21). Porter's 5 Forces. From Investopedia: https://www.investopedia.com/terms/p/porter.asp