Competitive Forces
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How competitive forces shape strategy
Awareness of these forees can help a company stake out a position in its industry that is less vulnerable to attack
Michael E. Porter
The nature and degree of competition in an industry hinge on five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services (where applicahle), and the jockeying among current contestants. To estahlish a strategic agenda for dealing with these contending currents and to grow despite them, a company must understand how they work in its industry and how they affect the company in its particular situation. The author details how these forces operate and suggests ways of adjusting to them, and, where possihle, of taking advantage of them. Mr. Porter is a specialist in industrial economics and business strategy. An associate professor of husiness administration at the Harvard Business School, he has created a course there entitled "Industry and Competitive Analysis." He sits on the hoards of three companies and
consults on strategy matters, and he has written many articles for economics journals and published two books. One of them, Interbrand Choice, Strategy and Bilateral Market Power (Harvard University Press, 1976) is an outgrowth of his doctoral thesis, for which he won the coveted Wells prize awarded by the Harvard economics department. He has recently completed two book manuscripts, one on competitive analysis in industry and the other (written with Michael Spence and Richard Caves) on competition in the open economy.
The essenee of strategy formulation is coping with competition. Yet it is easy to view competition too narrowly and too pessimistically. While one sometimes hears executives eomplaining to the eontrary, intense eompetition in an industry is neither coineidence nor bad luck. Moreover, in the fight for market share, competition is not manifested only in the other
How competitive forces shape strategy
Awareness of these forees can help a company stake out a position in its industry that is less vulnerable to attack
Michael E. Porter
The nature and degree of competition in an industry hinge on five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services (where applicahle), and the jockeying among current contestants. To estahlish a strategic agenda for dealing with these contending currents and to grow despite them, a company must understand how they work in its industry and how they affect the company in its particular situation. The author details how these forces operate and suggests ways of adjusting to them, and, where possihle, of taking advantage of them. Mr. Porter is a specialist in industrial economics and business strategy. An associate professor of husiness administration at the Harvard Business School, he has created a course there entitled "Industry and Competitive Analysis." He sits on the hoards of three companies and
consults on strategy matters, and he has written many articles for economics journals and published two books. One of them, Interbrand Choice, Strategy and Bilateral Market Power (Harvard University Press, 1976) is an outgrowth of his doctoral thesis, for which he won the coveted Wells prize awarded by the Harvard economics department. He has recently completed two book manuscripts, one on competitive analysis in industry and the other (written with Michael Spence and Richard Caves) on competition in the open economy.
The essenee of strategy formulation is coping with competition. Yet it is easy to view competition too narrowly and too pessimistically. While one sometimes hears executives eomplaining to the eontrary, intense eompetition in an industry is neither coineidence nor bad luck. Moreover, in the fight for market share, competition is not manifested only in the other