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.

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

SHAPE

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.

As different from one another as industries might appear on the surface, the underlying driv- ers of profi tability are the same. The global auto industry, for instance, appears to have nothing in common with the worldwide market for art masterpieces or the heavily regulated health-care

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LEADERSHIP AND STRATEGY | The Five Competitive Forces That Shape Strategy

80 Harvard Business Review | January 2008 | hbr.org

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