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A means of providing corporations with an analysis of their competition and determining
strategy, Porters five-forces model looks at the strength of five distinct competitive forces,
which, when taken together, determine long-term profitability and competition. Porters
work has had a greater influence on business strategy than any other theory in the last half
of the twentieth century, and his more recent work may have a similar impact on global
competition.
Michigan native Michael Porter was born in 1947, was educated at Princeton, and earned
an MBA (1971) and Ph.D. (1973) from Harvard. He was promoted to full professor at
Harvard at age 34 and is currently C. Roland Christensen Professor of Business
Administration at the Harvard Business School. He has published numerous books and
articles, the first Interbrand Choice, Strategy and Bilateral Market Power, appearing in
1976. His best known and most widely used and referenced books are Competitive
Strategy (1980) and Competitive Advantage (1985). Competitive Strategy revolutionized
contemporary approaches to business strategy through application of the five-forces
model. In Competitive Advantage, Porter further developed his strategy concepts to
include the creation of a sustainable advantage. His other model, the value chain model,
centers on product added value. Porters work is widely read by business strategists around
the world as well as business students. Any MBA student recognizes his name as one of
the icons of business literature. The Strategic Management Society named Porter the most
important living strategist in 1998, and Kevin Coyne of the consulting firm McKinsey and
Co. called Porter "the single most important strategist working today, and maybe of all
time."
The five-forces model was developed in Porters 1980 book, Competitive Strategy:
Techniques for Analyzing Industries and Competitors. To Porter, the classic means of
developing a strategya formula for competition, goals, and policies to achieve those
goalswas antiquated and in need of revision. Porter was searching for a solution between
the two schools of prevailing thought-the Harvard Business Schools urging firms to adjust
to a unique set of changing circumstances and that of the Boston Consulting Group, based
on the experience curve, whereby the more a company knows about the existing market,
the more its strategy can be directed to increase its share of the market.
Figure 1
Porter applied microeconomic principles to business strategy and analyzed the strategic
requirements of industrial sectors, not just specific companies. The five forces are
competitive factors which determine industry competition and include: suppliers, rivalry
