The Business Book

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T H E S T R O N G E S T

C O M P E T I T I V E F O R C E S

D E T E R M I N E T H E

P R O F I T A B I L I T Y

O F A N I N D U S T R Y

PORTER’S FIVE FORCES

I

n order to survive, companies

have to understand and

respond to competition. So

it is natural to look at immediate

competitors and established rivals

to develop a strategy. However,

this can restrict thinking, define

competition too narrowly, and

ignore other strategic forces. In

the 1970s, economist and strategist

Michael Porter changed people’s

thinking on strategy.

Porter’s 1979 article “How

Competitive Forces Shape Strategy”

showed that awareness of wider

competitive forces—those beyond

the obvious competing companies—

can help an organization

understand the structure of its

IN CONTEXT

FOCUS

Competitive strategy

KEY DATES

1921 US economist and

statistician Harold Hotelling

says that as long as there are

profits to be had in a market,

more and more vendors will

arrive to serve it, until it

reaches saturation point.

1979 Michael Porter’s “How

Competitive Forces Shape

Strategy” is published in

Harvard Business Review.

2005 W. Chan Kim and Renée

Mauborgne publish Blue

Ocean Strategy, suggesting

that companies should aim for

uncontested markets rather

than compete with each

other in existing markets.

2008 Michael Porter writes

The Five Competitive Forces

That Shape Strategy.