The Five Competitive Forces That Shape Strategy

The Five Competitive Forces That Shape Strategy

The Five Competitive Forces That Shape Strategy

Awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more

profitable and less vulnerable to attack.

by Michael E. Porter

Harvard Business Review (HBR), January 2008.

Editor’s Note: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist

and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In

subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations,

regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic

research and business practice. With prodding and assistance from Harvard Business School Professor Jan Rivkin and

longtime colleague Joan Magretta, Porter here reaffirms, updates, and extends the classic work. He also addresses common

misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for

strategy today.

In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition

too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established

industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute

products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of

competitive