By significantly broadening how we think about competition, Michael E. Porter’s Harvard Business Review article “How Competitive Forces Shape Strategy” launched a business management revolution among academics and practicioners when it was published in 1979 . The power of the concept, as time has born out, is that it can be extended to any industry: high tech, manufacturing, service, and even to competition on the scale of country against country.
In a new HBR article The Five Competitive Forces That Shape Strategy, Porter, a Harvard Business School professor, reaffirms, updates, and extends the classic work with significant practical guidance for users of the framework.
Porter says that an understanding of an industry’s competitive forces and their underlying causes is crucial component to strategy development, which is the building of defenses against the competitive forces or finding a position in an industry where the forces are weaker.
The forces he identifies are:
- Rivalry Among Existing Competitors
- Threat of Substitute Products or Services
- Threat of New Entrants
- Bargaining Power of Buyers
- Bargaining Power of Suppliers
In a video interview, Porter discusses in a down-to-earth manner the five forces in a number of industries including the airline business, and how managers can put the concept to good use.
