Porter's 5 Forces is a framework for business strategy analysis. It was developed by Michael Porter in 1979, and has since been used by businesses all over the world to inform their strategic decisions.

What are the 5 elements in Porter's 5 forces?

• The bargaining power of buyers;
• The bargaining power of suppliers;
• The threat of new entrants;
• The threat of substitutes;
• The competitive rivalry within the industry.
  

By understanding how these 5 forces impact a business, companies can make more informed strategic decisions about where to compete, what products or services to offer, and how to price their offerings.

Let's take a closer look at each of the 5 forces listed above.

Porter's Five Forces Template

The Bargaining Power Of Buyers

The bargaining power of buyers is the extent to which buyers can negotiate lower prices or better terms with suppliers.

Buyers have more bargaining power when:

- There are few suppliers in the market

- The buyers are large, and therefore have more clout when negotiating prices

- The product is not differentiated (i.e. there are many suppliers offering the same product)

- The buyers are well informed about the market and prices

The Bargaining Power Of Suppliers

The bargaining power of suppliers is the extent to which suppliers can negotiate higher prices or better terms with buyers.

Suppliers have more bargaining power when:

- There are few buyers in the market

- The suppliers are large, and therefore have more clout when negotiating prices

- The product is differentiated (i.e. there are few suppliers offering the same product)

- The buyers are not well informed about the market and prices

The Threat Of New Entrants

The threat of new entrants is the extent to which new companies can enter a market and compete with existing firms.

The threat of new entrants is high when:

- There are no barriers to entry into the market

- The market is not being served by existing firms

- The products offered in the market are not differentiated

- There is no brand loyalty among buyers

The Threat Of Substitutes

The threat of substitutes is the extent to which other products or services can be used in place of a particular product or service.

The threat of substitutes is high when:

- There are many substitute products or services available

- The substitute products or services are close substitutes (i.e. they offer the same or similar benefits to buyers)

- The substitute products or services are cheaper than the original product or service

The Competitive Rivalry Within An Industry

The competitive rivalry within an industry is the extent to which companies in an industry compete with each other for market share.

Competitive rivalry is high when:

- There are many companies in the market competing for the same buyers

- The companies are evenly matched in terms of their products, prices, and marketing efforts

- The companies are all trying to win market share by differentiating their products or offering lower prices

When To Use Porter's Five Forces Model

Porter's 5 Forces is a helpful framework for business strategy analysis, but it is not without its limitations.

First, the model only looks at external factors that can impact a business. It does not necessarily take into account internal factors such as a company's financial resources, organizational structure, or culture.

Second, the model is static, meaning it does not account for changes over time. For example, a company that is currently enjoying a large market share may see its position eroded by new entrants in the future.

Finally, the model does not always provide clear-cut answers. The outcome of each of the 5 forces depends on the specific situation and context in which a company operates.

Despite these limitations, Porter's 5 Forces is still a helpful tool for business strategy analysis. It can be used to identify the key drivers of competition in a market, and to assess a company's position relative to its rivals.

Porter's 5 Forces can also be used to help develop strategies for how to compete in a market. For example, if a company is facing strong competitive pressure from substitutes, it may need to focus on differentiating its products or services. Or, if a company is facing strong competitive pressure from new entrants, it may need to focus on creating barriers to entry.

Examples Of Porter's Five Forces In Action

Suppose we were in the ecommerce retail business, and we wanted to apply Porter's Five Forces to assess our business' strength of positioning in the market.

Here is an example of what each of the five factors might look like in this analysis.  

The Bargaining Power Of Suppliers

- We have a large number of suppliers to choose from

- The products we buy are not differentiated

- We are not well informed about the market and prices

The Bargaining Power Of Buyers

- There are many buyers in the market, and they are all looking for the best price

- The products offered in the market are not differentiated

- Buyers can easily switch to another supplier

The Threat Of New Entrants

- There are no barriers to entry into the market (i.e. anyone can start an ecommerce retail business)

- The market is not being served by existing firms (i.e. there are no dominant players)

- There is no brand loyalty among buyers

The Threat Of Substitutes

- There are many substitute products available in the market (i.e. any other product that can be sold online)

- The substitute products are close substitutes (i.e. they offer the same or similar benefits to buyers)

- The substitute products are cheaper than our products

The Competitive Rivalry Within The Industry

- There are many companies in the market competing for the same buyers

- The companies are evenly matched in terms of their products, prices, and marketing efforts

- The companies are all trying to win market share by differentiating their products or offering lower prices

How To Use The Porter's Five Forces Notion Template

Here are the steps for filling out this Porter's Five Forces Notion Template for yourself:

1. Enter the factors that are most relevant to your market and business under the 'Factor' property;
2. Group these factors in the Notion table under the relevant Force heading (Buyer Bargaining Power, Supplier Bargaining Power, etc.);
3. Provide a 'Response' to the factor or issue identified. This outlines how you propose to act or respond to the identified factor so as to maximize your strategic efforts--it might be a specific project initiative to combat threat of new entrants, or a more general statement about your audience targeting strategy in the face of high buyer bargaining power;
4. Link any relevant research of web sources to back up your claim on a given market factor; and
5. Finally, you can prioritize and rank factors within each sub-group to better focus your efforts.

This is just one example of how you can use this Notion template. You can customize it to fit your specific needs and business context. For example, you may want to add more sections or modify the existing sections.

If you're looking for more help with Porter's Five Forces, check out this article from Harvard Business Review: https://hbr.org/1979/03/how-competitive-forces-shape-strategy.

Otherwise, to get started, hit the 'Preview' button to take a look inside and get inspiration for your own setup--or simply duplicate this very template to your own Notion account with our Pro Access membership.