Ayoa’s Porter’s Five Forces template will enable you to analyze your profitability in a competitive market, then develop an effective business strategy.
Porter’s Five Forces Model was originally developed by Harvard University Professor, Michael E Porter, in 1979, yet it remains one of the most popular business analysis tools to this day. Also referred to as the Five Forces Analysis or the Five Forces Framework, it can help a business to determine whether they are likely to be successful if they move into a new market by examining its competition.
As its name suggests, the Five Forces Model requires you to examine five key areas to help you develop an effective business strategy. These are rivalry amongst existing competitors, the threat of new entrants into the market, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products and services.
We all know the importance of competitor research; particularly for business analysts, product developers, and marketing teams. By keeping up to date with what your competitors are doing, you can gain valuable insight into where they are finding success and take inspiration from their actions. It can also help you to determine current trends in the market.
Using Porter’s Five Forces before entering a new market can help your business to make better decisions, which can be easily justified to stakeholders and other members of your team. By examining your competition, suppliers, and customers in-depth, you can base your decisions on how much power you hold and whether there is potential for profit.
Ayoa’s Five Forces template is populated with the sections you need and some sticky note examples – all you need to do is start adding your own research! To get started, follow the steps below.
To access the template, sign up to Ayoa for free. Once you've signed up, navigate to the homepage to create a new whiteboard, mind map or task board and choose this template from the library.
Beginning in the box in the center of the template, take some time to examine the rivalry amongst existing competitors in your chosen market. Try to determine how saturated your market is, who your biggest competitors are, and how your product and service offerings compare to theirs – whether this is positively or negatively. Add this information to individual sticky notes and place these in the ‘rivalry amongst existing competitors’ box on the template – don’t forget, you can add as many as you need!
Now that you know who the competition is, it’s time to consider the possible threat of new entrants to the market as this can have the ability to change your position and have an effect on your potential profit. Consider factors that make your market easier or more appealing to enter than others, such as costs and how heavily it is regulated. As with the last section, use sticky notes to add this information to the template.
Next up, look at the potential bargaining power of your suppliers. Research how many suppliers are available to choose from and how expensive it would be for you to switch to another supplier if needed. Remember; if there is a limited amount of suppliers to choose from, they can charge more for their supplies – which will affect your profitability.
In a similar vein, the next area of the market to examine is the bargaining power of your buyers. You need to determine whether your customers have the potential to drive your prices down by analyzing how many buyers are in your market and what it would cost them to switch to another supplier. Consider if they can find more competitive prices or a higher quality elsewhere.
Last but not least, you need to analyze the threat of substitute products and services in your market. Try to find out if there are close substitutes to what you offer and whether you are offering a high enough quality service, product, or level of customer service to deter them from jumping ship.