When selecting a tool to analyse the business environment PESTLE and SWOT spring to mind. Whilst PESTLE identifies external factors, which in turn can be opportunities or threats, it can neglect factors that are specific to the organisation’s sector and therefore competitive environment. This is where Porter’s five forces model can play a part.
Porter’s Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps an organisation understand both the strength of its current competitive position, and the strength of a position it’s considering moving into.
The text below explains each of the forces in more detail. To aid your understanding make a note of the forces present in your organisation’s environment.