in this article, porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. the five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker.

in the economists’ “perfectly competitive” industry, jockeying for position is unbridled and entry to the industry very easy. the strongest competitive force or forces determine the profitability of an industry and so are of greatest importance in strategy formulation. economies of scale can also act as hurdles in distribution, utilization of the sales force, financing, and nearly any other part of a business. the causes of the decline in unit costs are a combination of elements, including economies of scale, the learning curve for labor, and capital-labor substitution. all this suggests that the experience curve can be a shaky entry barrier on which to build a strategy.

one way to analyze your competition – and understand your standing in your industry – is using porter's five forces model. rivalry competition is high when there are just a few businesses selling a product or service, when the industry is growing and when consumers can easily switch to a competitor's offering for little cost. this force analyzes how much power a business's supplier has and how much control it has over the potential to raise its prices, which, in turn, lowers a business's profitability. this force considers how easy or difficult it is for competitors to join the marketplace.

one of the most common tools companies use to analyze competition in an industry is porter's five forces. companies also use it to determine what factors in the industry might affect their success. the five forces factors include: this factor considers the number of competitors in the market and how strong they are. competition in an industry is low if few companies are offering the same products. the threat of new entrants is high if companies can enter the market easily and at little cost or if your company's idea or technology is not patented or protected. this factor considers the number of suppliers a company has access to and how easily suppliers can increase their prices or reduce their product quality.

one way to analyze your competition – and understand your standing in your industry – is using porter's five forces model. rivalry competition is high when there are just a few businesses selling a product or service, when the industry is growing and when consumers can easily switch to a competitor's offering for little cost. this force analyzes how much power a business's supplier has and how much control it has over the potential to raise its prices, which, in turn, lowers a business's profitability. this force considers how easy or difficult it is for competitors to join the marketplace.