RESULT OBTAINED
Canonical method
Porter’s five forces: testing the economic structure of a market
What must be established
A useful analysis keeps its controls visible.
- 01
Stabilise the boundary of the industry and the need that the substitutes address.
- 02
Distinguish the force itself from its determinants and from the observed symptoms.
- 03
Test how a regulatory, technological or commercial evolution shifts the structure.
Decision reference
Make the next choice more explicit.
DECISION SUPPORTED
Where can value be captured or eroded within the structure of the industry?
DELIVERABLE TO KEEP
A reasoned reading of the pressures that distribute value among the actors of the industry.
NEXT ELEMENT TO EXAMINE
CompetitorsExplore →Define the industry
A boundary that is too narrow hides the substitutes. A boundary that is too wide mixes different economics. The definition must remain consistent with the customers, suppliers and entrants analysed.
- Need served
- Geography
- Value chain
- Substitutes
Document the determinants
Each force must be linked to verifiable facts such as concentration, switching costs, access barriers or fixed costs.
- Observable indicator
- Source
- Trend
- Counter-example
Translate into choices
The conclusion does not come down to an attractiveness score. It specifies which positions remain defensible and which assumptions must be monitored.
- Possible position
- Trade-off
- Structural signal
Method dossier
Conditions of use, controls and limits
This dossier makes the reasoning verifiable. It does not turn a matrix into scientific proof.
Definition
The analysis links each force to its observable determinants, to its evolution and to the positioning options actually available.
Marketing case
Use Porter’s five forces when a team must produce a comparable diagnosis before choosing, deferring or abandoning an option. The method organises the examination; it replaces neither the human decision nor the evidence specific to the market studied.
Decision question
Where can value be captured or eroded within the structure of the industry?
Why this method
It requires making the criteria, the observations and the areas of uncertainty debatable before the commitment. The priority controls are: Stabilise the boundary of the industry and the need that the substitutes address. Distinguish the force itself from its determinants and from the observed symptoms. Test how a regulatory, technological or commercial evolution shifts the structure.
Intuition
The result becomes useful when each ranking or category can be linked to an observation, a convention and a decision consequence. A box, a list or a score remains an assumption as long as this link is not established.
Data required
Build a dated register: decision scope, unit analysed, comparable observations, source, period, ranking convention and missing elements. Separate facts, estimates, opinions and working assumptions.
Formalisation
Before any synthesis, set the units compared, the axes or criteria, the threshold rules and the handling of ambiguous cases. An optional weighting organises the discussion; it does not make the result objectively true.
Procedure
1. Frame the decision and the alternatives. 2. Gather comparable observations. 3. Document each ranking and counter-argument. 4. Translate the result into an option, a renunciation, a threshold and a review date.
Worked example
On a teaching case, fill in the variables for two options over the same horizon, make the ranking explicit and record what would change the conclusion. Example values are not market data and must never be generalised without control.
Assumptions
Make sure the assumptions about the scope, the comparability of the observations, the stability of the categories and the mechanism linking the diagnosis to the option are testable. Any assumption that cannot be tested with the available data must remain flagged as such.
Diagnostics
Check the definitions, periods, units, sources and contradictions. If a data point is missing, too old or not comparable, do not compensate silently: flag it, lower the confidence level and define the collection needed.
Robustness
Counter-test the diagnosis with a competing option, a reasonably different convention or an independent source. If the conclusion tips over, present it as sensitive to the model or the assumption, not as a stable recommendation.
Interpretation
Interpret the result as an aid to comparison. It can reveal a diligence priority, an incompatibility or an option to explore; on its own it does not give an order to invest, divest or launch.
What can be concluded
The sheet makes it possible to formulate a reasoned reading of the pressures that distribute value among the actors of the industry.
What cannot be concluded
The model describes an industry structure, not the guaranteed performance of a company nor an automatic entry recommendation.
Marketing decision
Record the option retained, the options discarded, the decisive criteria, the insufficient evidence and the decision-maker. A useful conclusion also describes what should be observed before reinforcing or reversing the choice.
When to use or avoid
Use the method when the units to compare and the decision are explicit. Avoid it when the scope is undefined, the data is not comparable, or when a causal conclusion, a quantified forecast or a detailed operational decision is requested without a suitable protocol.
Reproducibility
This sheet describes a reasoning protocol, not a universal result. To reproduce an analysis, keep the register of inputs, the sources, the dates, the conventions, the transformations, the rankings and the version of the deliverable. Without these artefacts, the result is only illustrative.
Level of evidence and sources
Maximum level declared: E1 for documented definitions and sources; E0 for the decision grids proposed by the sheet. 2 sources are displayed below. No causal or predictive conclusion is claimed.
DECISION ASSET
Dossier of the determinants of industry structure
Each force is linked to its determinants, to facts and to a plausible evolution.
Rivalry
- Input
- Growth, fixed costs, exits
- Control
- Why do the actors fight?
- Output
- Competitive pressure
Customers and suppliers
- Input
- Concentration, alternatives
- Control
- Who can impose their terms?
- Output
- Bargaining power
Entrants
- Input
- Access, capital, regulation
- Control
- Which barrier is defensible?
- Output
- Threat of entry
Substitutes
- Input
- Need and customer trade-off
- Control
- Which other solution meets the need?
- Output
- Value ceiling
- The Five Forces, Harvard Business School (opens in a new tab)Reference source on the five forces and the determinants of industry structure.
- Analysing competition with the five forces, Bpifrance Création (opens in a new tab)French application to market studies and reminder of the five pressures.
MOVE FROM ANALYSIS TO YOUR DECISION
Produce a testable decision mandate
MOVE FROM ANALYSIS TO YOUR DECISION
Produce a testable decision mandate
RETURN TO THE DECISION SYSTEM
See the canonical definition of marketing strategy→