Five Forces

Halden Zimmermann’s latest blog post

Five Forces

by Halden Zimmermann

The Five Competitive Forces model is a framework created by Michael E. Porter in 1980.

He included it in his book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors.” This model is a tool used frequently in organizing an analysis of a company’s positioning and risks associated with entering to remaining in a specific market.

Five Forces Model

Five Forces Model

Thinking through the five forces, I wanted to address a few things with this model so that is can be effective, instead of a fill in the blank framework people discuss in meetings and then walk away.

For each of the forces there should be a specific understanding of the risk potential associated with each of the categorized responses. The risk metering should then be met with a specific action to offset or reduce this risk. A great tool for analyzing this is a PFMEA tool set which is typically used in process design and the risk of having a particular failure mode. The risk priority number (RPN) on the PFMEA tool would be the metric used to understand the potential of a failure occurring and then action surrounding those high potential problems would result in a recalculating of the RPN number. Using the PFMEA tool set you have a tool that not only captures potential risk factors but also puts a metric around level of risk and tracks actions to improve upon your position.

Another thing to consider is to completely sidestep the positioning in your market. If you are spending a lot of time trying to tactically address specific problems associated with weak barriers to the five forces, i would estimate your margin is in great risk for your business. This is because 80% of your time should be focused on creating new markets or “blue oceans” to be specific. Creating a new market starts at the customer and does not rely on how competitors and suppliers would respond as a priority.

from Halden Zimmermann http://haldenzimmermann.org/fiveforces/

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