01 / UNDERSTAND
What are Porter’s Five Forces?
Porter’s Five Forces examines the competitive structure of an industry: rivalry, new entrants, substitutes, buyer power and supplier power. Developed by Michael Porter, it helps explain how competitive pressures influence the value an industry can retain. It is an industry analysis, not a competitor feature checklist.
For a designer, the useful question is how those pressures constrain a credible service proposition. A smoother interface can help people use an offer; it cannot by itself remove a supplier dependency or a substitute that better meets their underlying need.
Why use Porter’s Five Forces?
A product brief can treat competition as a list of similar apps. That misses alternatives outside the category and actors who influence access, cost or delivery. Reviewing the five forces widens the strategic question before a team invests in a proposition whose economics or dependencies remain unclear. The result should inform a choice, rather than decorate a presentation with five generic scores.
When to use it
USE IT WHEN
The team is entering an industry or reconsidering its position.
An offer depends on actors with potential bargaining power.
A product direction is being justified mainly through comparisons of features.
When to choose another method
Use Competitive Analysis for a focused review of existing offers.
Use User Interviews to understand the need an alternative meets.
Use PESTLE Analysis for external context beyond industry competition.
What you’ll need
Define the industry boundary, geography and relevant horizon. Identify who buys, who supplies critical inputs and what alternatives fulfil the underlying need. Gather traceable evidence on switching, concentration, entry conditions and differentiation. Involve commercial and operational colleagues. Keep disputed assumptions visible rather than converting uncertain impressions into precise ratings.
The five competitive forces
Keep the elements that help answer your question and support a decision.
How existing providers compete and what makes their offers distinct.
Conditions that make entry easier or harder.
Different ways of meeting the underlying need.
Conditions that let purchasers negotiate or switch.
Dependencies that give input providers negotiating influence.
The definition that makes the five forces interpretable.
02 / PUT IT INTO PRACTICE
How to analyse an industry with the five forces
Keep evidence and assumptions distinct. Revisit your work when new information changes your understanding.
01
Define the industry
Name the transaction and scope before identifying competitors.
Analyse managed repair services in one region, rather than every home related app.
02
Map the actors
Separate purchasers, users and suppliers where they differ.
A housing provider may buy while residents use the service.
03
Review rivalry
Examine differentiation, switching and the basis of competition.
Compare reliability and coverage as well as the booking interface.
04
Check entry and substitutes
Consider what makes entry possible and how needs could be met differently.
An internal maintenance team may substitute for a managed provider.
05
Assess bargaining conditions
Use evidence about concentration, alternatives and dependencies.
Specialist contractor scarcity may constrain delivery commitments.
06
Connect the pressures
Explain how forces combine around the proposed position.
A narrow coverage promise may be more credible than unlimited availability.
07
Test a strategic implication
Identify evidence that could change the choice and assign the investigation.
Validate contractor commitments before designing the regional launch offer.
Example: positioning a managed repair service
Fictional scenario: a team considers a managed repair service for local housing providers. Housing providers purchase it, residents use it and specialist contractors supply part of the delivery. The analysis suggests a possible dependency on a small pool of contractors, while buyers could compare several managed services or use an internal team. These conditions are illustrative.
The diagram places the proposed service between the five pressures. Each note records a mechanism to verify, rather than a high or low score. The team considers a bounded reliability promise supported by contractor agreements.
The next step is to test delivery commitments and buyer alternatives. Resident research remains necessary to shape the experience, but residents’ preference for easy booking does not establish the purchaser’s bargaining power.
03 / BELOW THE SURFACE
Below the surface: the buyer may not be the person using the service
Combining roles can turn a useful industry analysis into an incorrect account of power.
BOUNDARY
Which industry and transaction are we analysing?
Keep the unit of analysis explicit.
POWER
Who can negotiate or switch, and at what cost?
Separate purchaser and user roles.
PROMISE
What can the service credibly deliver under these pressures?
Test a strategic implication.
In a purchased service, the buyer can negotiate contracts while the person receiving the service has little ability to switch. A resident’s frustration and a housing provider’s negotiating leverage describe different relationships. Treating them as one customer hides a tension that the design needs to address.
Identify the transaction behind each force and keep roles distinct. Preference is not the same as bargaining power. Ask who can move spending, withhold a critical input or choose an alternative, and what that choice costs.
This editorial check does not add a sixth competitive force. It makes the industry boundary explicit. A proposition may look attractive to its purchaser while shifting uncertainty onto its users; consider that consequence alongside the commercial implication before deciding what the service should promise.
Porter’s Five Forces companion worksheet
The original companion records the industry boundary and five forces. Page two connects evidence, actor roles and dependencies to a proposed strategic choice. It attributes the framework to Michael Porter and does not claim to provide a validated industry rating.
Practical tips
Define the industry before comparing forces.
Record a mechanism and source for each claim.
Translate the analysis into a testable strategic choice.
Common mistakes
Comparing only the features of similar products.
Confusing user preference with buyer power.
Assigning precise scores without supporting evidence.
What you’ll get
A clearer account of competitive pressure and the assumptions behind a proposed position. Investigate a consequential dependency before committing the service promise or investment.