Awareness of the fi ve forces can help a company understand the structure of its industry and stake out a position that is more profi table and less vulnerable to attack.
78 Harvard Business Review | January 2008 | hbr.org
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Editor’s Note: In 1979, Harvard Business Review published “How Competitive Forces Shape Strat-
egy” by a young economist and associate professor,
Michael E. Porter. It was his fi rst HBR article, and it
started a revolution in the strategy fi eld. In subsequent
decades, Porter has brought his signature economic
rigor to the study of competitive strategy for corpora-
tions, regions, nations, and, more recently, health care
and philanthropy. “Porter’s fi ve forces” have shaped a
generation of academic research and business practice.
With prodding and assistance from Harvard Business
School Professor Jan Rivkin and longtime colleague
Joan Magretta, Porter here reaffi rms, updates, and
extends the classic work. He also addresses common
misunderstandings, provides practical guidance for
users of the framework, and offers a deeper view of
its implications for strategy today.
THE FIVE COMPETITIVE FORCES THAT
by Michael E. Porter
hbr.org | January 2008 | Harvard Business Review 79
IN ESSENCE, the job of the strategist is to under-
STRATEGYSTRATEGY stand and cope with competition. Often, however, managers defi ne competition too narrowly, as if it occurred only among today’s direct competi- tors. Yet competition for profi ts goes beyond es- tablished industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all fi ve forces defi nes an industry’s structure and shapes the nature of competitive interaction within an industry.