Five forces industry assessment template (Word)

What it is

Porter's five forces is a way to judge how profitable an industry is likely to be. Michael E. Porter set out the idea in the Harvard Business Review in 1979 and revisited it there in 2008. The five forces are the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitutes and rivalry among existing competitors.

The stronger the forces, the more they squeeze industry profits. The method describes an industry's structure, not any one firm. This template adds the steps that turn the description into choices.

Who it is for

Strategy and corporate development teams, founders deciding where to compete, investors screening an industry, analysts and students.

When to use it, and when not to

• Use it when choosing an industry or segment to enter, when judging whether margins are likely to hold, or when you need a shared view of why an industry is hard.
• Do not use it with a vague industry definition. A loose boundary blurs every force.
• Do not use it as the only input. It shows structure at one time; pair it with a PESTEL scan for outside change and a SWOT for your own position.

What is inside

A Word document with a how-to box and these sections:

• Section 1. Define the industry: products, geography, customers and the competitors customers compare.
• Sections 2 to 6. One per force. Each has the drivers to rate (for example switching costs, buyer concentration or exit barriers), a column for evidence and for whether the driver pushes the force up, leaves it neutral or pushes it down, then an overall rating (Low, Medium or High), a trend and a so-what.
• Section 7. The overall picture: a five-row table, an industry attractiveness paragraph, where you stand, and a table of moves open to you.
• Section 8. Limits and next steps.

How to fill it in

1. Define the industry tightly: the products and the geography that actually compete.
2. For each driver, write the evidence and mark whether it pushes the force up, neutral or down.
3. Give each force an overall rating and a trend. A moderate force that is rising can matter more than a strong one that is easing.
4. Fill the overall table and write a short paragraph on how attractive the industry is.
5. Place yourself: which forces you are better placed against than the average competitor, and which hit you harder.
6. List the moves open to you, the force each addresses, the effect you expect and the cost.

Worked example (an illustration)

Illustration only. The industry, the ratings and the drivers below are made up, to show how the ratings read together. They are not real data.

A made-up grocery delivery service in one city:

Four of five forces are strong, so the industry looks hard on price. The moves open to a firm here are about loyalty and reliability, such as a subscription, delivery slots customers can count on and exclusive local suppliers, which lower buyer power and give rivals less to copy.

Common mistakes

• Rating your firm instead of the industry. Do that in the “where we stand” step.
• Listing every possible driver. Rate the ones with evidence.
• Ignoring the trend. The direction of a force often matters more than its level.
• Treating a High rating as a verdict. It says where the pressure is, and the rest is up to your choices.
• Ignoring regulation and complementary products. In Porter's 2008 account they are not forces of their own, but they can change the strength of the five, so note their effect where it applies.

Download

Free to download. The numbers in the file are made up, so replace them.

Use and limits

Free to use and adapt for your own work. If you publish or share it, a link back is appreciated.

Sources and further reading

Sources are linked so you can check them. Statements that vary by employer, or that accounts disagree about, are hedged in the text. Found a mistake? Email support@forwardeployed.work and we will correct the page and update its date.

1. How Competitive Forces Shape Strategy. Michael E. Porter, Harvard Business Review, March-April 1979.
2. The Five Competitive Forces That Shape Strategy. Michael E. Porter, Harvard Business Review, January 2008.
3. Porter's five forces analysis. Encyclopedia entry.