Competitive Forces Model (Porter's Five Forces)
Originally published: 27/06/2018 07:41
Last version published: 16/01/2019 09:14
Publication number: ELQ-46986-2
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Competitive Forces Model (Porter's Five Forces)

This competitive forces model is a useful for analyzing the six forces affecting a company's competitive position.

In the strategic planning process, external analysis plays an important role as it assesses a company's operating environment and identifies opportunities and threats for the company.

One of the crucial steps in an external analysis is to analyze the six competitive forces - intensity of industry rivalry, threat of potential entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute goods/services, and power of complementary goods/services. Using this competitive forces model, you can neatly outline the key elements of each of the six forces and have a clear picture of where a company is standing among its rivals.

Competitive forces model is an important tool used in a strategic analysis to analyze the competitiveness in an industry. This model is more commonly referred to as Porter’s Five Forces Model, which includes five forces — intensity of rivalry, threat of potential new entrants, bargaining power of buyers, bargaining power of suppliers, and threat of substitute goods and/or services. In our competitive forces model, we include a sixth force, power of complementary goods and/or services providers. This model helps company understand the risks in the industry it is operating in and decide how it wants to execute its strategies in response to competition.

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