Porter’s Five Forces is a tool that allows you to analyze your competitive environment by evaluating the power of five groups of economic determinants:
- The bargaining power of customers
- The bargaining power of suppliers
- The threat of substitution products
- The threat of new entrants
- Direct competition in the industry
In the industry in which your business operates, these forces have the potential either to increase or to reduce its competitive advantage. Having a good understanding of them will allow you to evaluate the strengths and weaknesses of your business in the industry so that you can improve your positioning in relation to competitors.