Porter’s Five Forces: Industry Analysis with a Worked Example

May 2, 2026

Author: Shusaku Yosa

Porter’s Five Forces examines pressures on industry profitability: rivalry, new entrants, substitutes, buyer power and supplier power. It is not a score of one company’s strengths. It asks how relationships in an industry affect prices, costs and the distribution of value.

See Harvard Business School’s framework overview. Begin by defining the industry rather than scoring vaguely identified competitors.

Define the boundary first

“Technology” is too broad for a useful single analysis. For illustration, consider work-reporting software for small manufacturers in Japan. Record geography, use case, customer scope and date. Aoba Tools is fictional, and the observations below are hypotheses rather than market research.

Another reporting product may be a direct rival; spreadsheets or outsourced reporting may satisfy the same underlying need differently and serve as substitutes. The classification depends on the boundary you chose.

Collect evidence for each force

Force	Question	Candidate evidence
Rivalry	What drives discounting or competitive cost?	Proposals, pricing, contracts and loss reasons
Entry	What prevents or enables a new provider?	Development, distribution, trust and restrictions
Substitution	What other approach solves the same problem?	Current workflows and switching burden
Buyer power	Can customers readily change providers or terms?	Concentration, procurement and switching cost
Supplier power	Which essential inputs create dependence?	Contracts, alternatives and migration effort

Avoid universal thresholds such as a particular number of rivals or market-share percentage. Similar counts can produce different pressures depending on differentiation, switching, growth and concentration.

A fictional interpretation table

Hypothesis	Evidence still required	Possible response
Customers can continue with spreadsheets	Burden of the current process versus change	Pilot limited migration support
Offers are compared mainly on price	Actual comparison criteria	Clarify service and support scope
The business depends on one platform	Price, portability and contractual exposure	Review alternatives and exit feasibility
Revenue depends on a few customers	Impact of loss or renegotiation	Review concentration and commercial terms

Do not jump from “strong pressure” to “exit the industry.” Narrowing scope, standardizing delivery or reducing dependence may be alternatives. Conversely, an attractive industry does not guarantee that your company can serve it economically.

Mark uncertainty instead of disguising it as a score

If the team uses high, medium and low ratings, attach the evidence, date and unresolved question. An unsupported item is unknown, not low. An average score is not a measured industry profit rate.

Different customer segments may have different bargaining power. Analyze them separately when a combined rating hides a decisive difference. Separate current evidence from future scenarios as well.

Connect the analysis to other decisions

Framework	Primary focus	Useful handoff
Five Forces	Industry structure and pressure	Dependence, substitution and bargaining conditions
3C	Customer, competitor and company	Customer choices and delivery capability
SWOT	Internal and external factors	Evidence-backed opportunities and threats

Use a worksheet containing the scope, force, source and date, mechanism affecting economics, unknowns, response option, owner and deadline. Review it when supply terms, technology, procurement or competitors’ business models change.

The next step should resolve a consequential uncertainty—for example, whether customers actually reject a product because migration is difficult. A completed diagram is useful only if it improves the decision that follows.