Porter’s Five Forces: Industry Analysis with a Worked Example
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Category: Media Strategy
Authors: Shusaku Yosa
Porter’s Five Forces examines pressures on industry profitability: rivalry, new entrants, substitutes, buyer power and supplier power. It is not a score of one company’s strengths. It asks how relationships in an industry affect prices, costs and the distribution of value.
See Harvard Business School’s framework overview. Begin by defining the industry rather than scoring vaguely identified competitors.
Define the boundary first
“Technology” is too broad for a useful single analysis. For illustration, consider work-reporting software for small manufacturers in Japan. Record geography, use case, customer scope and date. Aoba Tools is fictional, and the observations below are hypotheses rather than market research.
Another reporting product may be a direct rival; spreadsheets or outsourced reporting may satisfy the same underlying need differently and serve as substitutes. The classification depends on the boundary you chose.
Collect evidence for each force
Force | Question | Candidate evidence |
|---|---|---|
Rivalry | What drives discounting or competitive cost? | Proposals, pricing, contracts and loss reasons |
Entry | What prevents or enables a new provider? | Development, distribution, trust and restrictions |
Substitution | What other approach solves the same problem? | Current workflows and switching burden |
Buyer power | Can customers readily change providers or terms? | Concentration, procurement and switching cost |
Supplier power | Which essential inputs create dependence? | Contracts, alternatives and migration effort |
Avoid universal thresholds such as a particular number of rivals or market-share percentage. Similar counts can produce different pressures depending on differentiation, switching, growth and concentration.
A fictional interpretation table
Hypothesis | Evidence still required | Possible response |
|---|---|---|
Customers can continue with spreadsheets | Burden of the current process versus change | Pilot limited migration support |
Offers are compared mainly on price | Actual comparison criteria | Clarify service and support scope |
The business depends on one platform | Price, portability and contractual exposure | Review alternatives and exit feasibility |
Revenue depends on a few customers | Impact of loss or renegotiation | Review concentration and commercial terms |
Do not jump from “strong pressure” to “exit the industry.” Narrowing scope, standardizing delivery or reducing dependence may be alternatives. Conversely, an attractive industry does not guarantee that your company can serve it economically.
Mark uncertainty instead of disguising it as a score
If the team uses high, medium and low ratings, attach the evidence, date and unresolved question. An unsupported item is unknown, not low. An average score is not a measured industry profit rate.
Different customer segments may have different bargaining power. Analyze them separately when a combined rating hides a decisive difference. Separate current evidence from future scenarios as well.
Connect the analysis to other decisions
Framework | Primary focus | Useful handoff |
|---|---|---|
Five Forces | Industry structure and pressure | Dependence, substitution and bargaining conditions |
3C | Customer, competitor and company | Customer choices and delivery capability |
SWOT | Internal and external factors | Evidence-backed opportunities and threats |
Use a worksheet containing the scope, force, source and date, mechanism affecting economics, unknowns, response option, owner and deadline. Review it when supply terms, technology, procurement or competitors’ business models change.
The next step should resolve a consequential uncertainty—for example, whether customers actually reject a product because migration is difficult. A completed diagram is useful only if it improves the decision that follows.
Related guides
- 3C Analysis: Customer, Competitor, and Company with a Worked Example
- STP Analysis: A Worked Example and Positioning Template
- The 4 Ps of Marketing: A Worked Example and Planning Template
Sources and verification
References checked on October 1, 2026. The examples and worksheets in this article are editorial illustrations, not reported customer results.
