Position · Diagnose

Porter's Five Forces

An industry-structure tool, not a competitor tool. It answers "can anyone make money here, and who captures it" — usually a more important question than "who are we up against".

Stage

01 Diagnose

Works at

Corporate, Business

Maturity

Scaling → Large organisation

Time

2 hours

What it is

A structural read of an industry, developed by Michael Porter, that asks a blunt question: does this industry allow anyone to make sustained profit, and if so, who captures it? Five forces squeeze the profit available. The more of them that are strong, the more the industry's earnings leak away to somebody else — suppliers, buyers, rivals or newcomers.

Competitive rivalry: How hard existing players fight each other. High when there are many similar competitors, slow growth, high fixed costs, or nothing much to differentiate on — all of which push the industry toward competing on price.
Threat of new entrants: How easily someone new can start taking your customers. Governed by barriers: capital needed, regulation, brand, distribution access, economies of scale. Low barriers cap your margin even if nobody has entered yet, because the threat alone disciplines pricing.
Threat of substitutes: Not rival products — different ways of getting the same job done. A substitute for a hand tool might be hiring someone who brings their own. Substitutes put a ceiling on price that competitor analysis will never reveal.
Bargaining power of buyers: How much your customers can force your price down. High when they are few and large, when switching is easy, when they can see your costs, or when what you sell is undifferentiated.
Bargaining power of suppliers: The same in reverse. High when suppliers are concentrated, when their input is critical, or when they could plausibly move forward into your part of the chain.

The mistake people makeThis is about the industry, not your company. If you find yourself writing about your own performance, you have drifted into a SWOT. And define the industry by the customer need served, not by your product category — drawn too narrowly, the analysis misses the substitute that eventually kills you.

What it’s forYou want to know whether this industry structurally permits anyone to make money, and where profit will sit in three years.

What it’s not forYou are looking at one competitor or a specific customer problem. Five Forces is about the industry, not the rival.

How you run it

Define the industry honestlyToo wide and every force looks moderate; too narrow and you miss the substitute that kills you. Define it by the customer need served, not your product category.
Work each force with evidenceWrite the rating and the specific fact behind it. "Buyer power high — three merchants are 61% of our volume" beats "buyers have power".
Find where the profit actually sitsFollow the margin along the chain. The most profitable player is often not the one doing the most work.
Project forward three yearsWhich forces are strengthening? Medium-and-rising matters more than high-and-stable.
Name the implicationA Five Forces that ends in five ratings is unfinished. It ends when you can say what the structure means you must do.

The prompt

Two ways to run it

Run this tool in your own Claude

The short prompt starts your partner against the library on your disk. The long one carries everything with it and needs nothing installed.

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🔒 Prompt locked

Everything above is free — what this tool is, what it is for, what it is not for, and how to run it as a workshop. Three tool prompts a month are free with an account; beyond three, and for the printable canvas, it is the paid part.

See plans — from £19 a month

Your playbook

It lands in the earliest stage this tool suits. Move it on the Playbook page.

You’ll need

A clear definition of which industry you are in
Who your suppliers and buyers actually are
Some sense of margins across the chain

You’ll end up with

Five forces rated with a justification each
A view on where profit sits today and in three years
The one or two forces worth building strategy around

Runs well with

AI risk classification and governance Analysis plan Business Model Canvas Comparable company benchmark