What Are Porter's 5 Competitive Forces? How to Apply Them
What Are Porter's 5 Competitive Forces?
You usually encounter this model when analysing an industry, a market, or a company's competitive position. The central question is which forces in the industry environment are shaping the company's profitability and competitive position.
Porter's 5 Competitive Forces model, commonly called Porter's Five Forces, was proposed by Michael Porter. It evaluates the attractiveness of an industry through five forces: rivalry among existing competitors, the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products or services.
This is a framework for analysing the industry environment, not a statistical test built into SPSS. When you bring it into a quantitative thesis, you must turn each force into a research concept, indicators, a scale, and hypotheses. This section usually belongs after the theoretical review and before the questionnaire design.
You can place the Porter model alongside other strategic tools. The SWOT model is useful when you want to summarise strengths, weaknesses, opportunities, and threats. Porter's value chain model focuses on the value-creating activities inside the company, whereas Five Forces focuses on external industry pressure.
Components of the model
The five components below are not five mandatory independent variables for every topic. You need to choose a measurement approach that fits your research question and industry context. If you survey managers, the data will reflect their perceptions. If you survey customers, some forces, such as supplier power, may be difficult to measure directly.
| Competitive force | What to examine | Examples of measurable indicators |
|---|---|---|
| Rivalry among existing competitors | The number, size, growth rate, and level of confrontation among companies in the industry | Competition over price, advertising, quality, and distribution channels |
| Threat of new entrants | How easy or difficult it is for a new company to enter the market | Investment capital, brand, regulations, technology, and economies of scale |
| Bargaining power of suppliers | The ability of suppliers to influence price, quality, and transaction terms | Number of suppliers, switching costs, and level of dependence |
| Bargaining power of buyers | The ability of buyers to demand lower prices or better conditions | Price sensitivity, switching ability, and purchase volume |
| Threat of substitute products or services | The possibility that customers will use another solution to satisfy the same need | Number of substitutes, substitution value, and switching costs |
You need to distinguish high pressure from strong business performance. High competitive pressure often makes it harder for a company to maintain its profit margin, but the final effect also depends on strategy, internal capabilities, and market characteristics. When writing hypotheses, therefore, specify the variable affected by the force, such as business performance, continuance intention, or competitive advantage.
Some studies use the five forces as explanatory variables for competitive advantage. Others treat each force as a factor group for evaluating industry attractiveness. These two approaches produce different questionnaires and different models to test. Do not copy all five variable groups if your research objective concerns only one or two forces.
The original model and common extensions
The original model describes the competitive structure of an industry at a particular point in time. It helps you identify where a company is under pressure, but it does not fully describe internal company factors, technological change, or the influence of stakeholders outside the industry.
In practice, the model is often extended in three directions. The first is adding government and regulation when studying an industry under strong legal control. The second is adding complementary products, such as payment platforms, technology ecosystems, or distribution networks that support the main product. The third is combining the model with the company's internal resources to explain why two companies facing the same pressure can achieve different outcomes.
You can also use the Porter model with the Balanced Scorecard when the topic needs to connect competitive environment analysis with financial, customer, internal process, and learning and growth perspectives. The BCG model is more suitable for product portfolio allocation decisions. These models do not replace Five Forces because they answer different questions.
When you extend the model, state clearly which variable you are adding and the theoretical reason for adding it. Avoid adding “economic environment,” “technology,” or “policy” simply because each sounds reasonable. Every new variable needs a definition, a scale, a reference source, and a specific position in the conceptual model.
Scales commonly used for each concept
Five Forces does not come with a single measurement scale used by every study. You usually need to adapt indicators from research conducted in a similar context, then adjust the wording for your industry and respondents. Guidance on scale design, coding, and testing can be presented with (Nguyễn Đình Thọ, 2011).
The table below gives you a starting framework for building the questionnaire. It is a suggested structure, not a scale that has already been validated for your topic.
| Concept | Suggested measurement content | Source or adaptation direction |
|---|---|---|
| Rivalry among existing competitors | Intensity of competition over price, quality, promotion, and customers | Adapt research from the same industry, then recheck it with EFA and CFA or PLS-SEM |
| Threat from new entrants | Entry barriers, capital requirements, brand, technology, and distribution channels | Adjust it to the industry context and refer to the scale development process in (Nguyễn Đình Thọ, 2011) |
| Supplier power | Level of dependence, ability to replace suppliers, and suppliers' ability to raise prices | Adapt research from the same field and check content suitability |
| Buyer power | Buyers' ability to demand lower prices, switch to competitors, and request better service | Adapt research from the same field and adjust the survey language |
| Substitute products or services | Number of substitutes, attractiveness, and switching costs | Adapt research from the same field and pilot-test it with a small group |
| Competitive advantage or business performance | Ability to create value, retain customers, increase revenue, or achieve better results than competitors | Choose the outcome variable according to the research question and do not combine indicators arbitrarily |
Each concept should have several indicators measured with the same Likert scale. For a Likert scale, you can design response levels from strongly disagree to strongly agree, based on the attitude measurement foundation of (Likert, 1932). Code the indicators clearly, such as CT1 to CT4 for current rivalry, NCC1 to NCC4 for supplier power, and KH1 to KH4 for buyer power.
A good indicator expresses one idea. The statement “Competitors compete intensely on price, quality, and service” combines three different contents. If a respondent agrees about price but disagrees about service, your data will be difficult to interpret. Separate these into different indicators, or retain only the aspect that fits the concept definition.
Applying the model to your topic
Suppose you are studying: The effects of competitive forces on the competitive advantage of fashion retail companies in Ho Chi Minh City. The conceptual model contains five independent variables and one dependent variable, competitive advantage.
The model can be written as:
Competitive advantage = f(current rivalry, new entrants, suppliers, buyers, substitutes)
Decide the direction of the effect before writing your hypotheses. If you measure the “level of pressure,” higher pressure may reduce competitive advantage. If you measure the “ability to respond to pressure,” a higher score may be associated with higher competitive advantage. Do not mix these two naming approaches within the same questionnaire.
Below is an example of hypotheses for you to adapt. These hypotheses illustrate the structure of the model and are not the results of a real study.
- H1: Rivalry among existing competitors affects the competitive advantage of fashion retail companies.
- H2: The threat of new entrants affects the competitive advantage of fashion retail companies.
- H3: The bargaining power of suppliers affects the competitive advantage of fashion retail companies.
- H4: The bargaining power of buyers affects the competitive advantage of fashion retail companies.
- H5: The threat of substitute products or services affects the competitive advantage of fashion retail companies.
If your supervisor requires only H1 through H4, select the four relationships with the clearest basis and explain why you removed the remaining relationship. Do not rename a hypothesis after distributing the questionnaire without updating the model, variable codes, and methods section.
How to write this in your thesis
You can adapt the following paragraph: “Based on Porter's 5 Competitive Forces model, this study proposes [number] factors, including [names of factors], that affect [dependent variable] in the context of [research subjects and location]. The hypotheses are tested using survey data collected from [survey respondents], with a scale comprising [number] indicators.”
This paragraph needs to appear with a model diagram, a definition of each concept, the scale source, and an argument for each hypothesis. The diagram is only the visible part. The committee will usually ask why you selected that variable, why you selected those respondents, and why you specified that direction of effect.
Testing the model with SPSS or SmartPLS
If your topic uses Likert indicators and you want to test reliability, EFA, correlations, and regression, SPSS is easy to follow. The usual process includes importing the data, checking missing data, running Cronbach's Alpha, running EFA, creating composite variables, and running linear regression.
In SPSS, open Analyze > Scale > Reliability Analysis to check Cronbach's Alpha. Then use Analyze > Dimension Reduction > Factor to run EFA and review KMO and Bartlett's Test, Total Variance Explained, and Rotated Component Matrix. For regression, go to Analyze > Regression > Linear, place competitive advantage in the Dependent field, and place the forces in Independent(s).
If your model has latent variables and several relationships, and you want to assess the measurement model and structural model at the same time, SmartPLS is more suitable. In SmartPLS 4, import the .csv file, create constructs, draw arrows between constructs, and run PLS-SEM Algorithm. Then use Calculate > Bootstrapping to check the path coefficient, t-value, and confidence interval.
With PLS-SEM, assess the measurement model first and interpret the structural model afterwards. The indicators commonly reviewed include outer loading, CR, AVE, HTMT, VIF, R², f², and Q². An outer loading from 0.7 up, CR from 0.7 up, and AVE from 0.5 up are commonly referenced thresholds in (Hair et al., 2022) and (Fornell and Larcker, 1981). HTMT should be below 0.85, or below 0.90 for closely related concepts (Henseler et al., 2015). Report VIF below 5 according to (Hair et al., 2019).
| Indicator | Illustrative output | How to read it |
|---|---|---|
| Outer Loading of CT2 | 0.742 | You may consider retaining it if the content and other indicators are appropriate |
| CR of Current Rivalry | 0.861 | Composite reliability reaches the reference threshold (Fornell and Larcker, 1981) |
| AVE of Current Rivalry | 0.608 | It may support convergent validity according to (Fornell and Larcker, 1981) |
| HTMT between CT and NCC | 0.781 | Below 0.85 according to (Henseler et al., 2015) |
| VIF of Buyer Power | 2.146 | Below 5 according to (Hair et al., 2019) |
| Path coefficient CT → Competitive Advantage | -0.284 | A negative direction in the illustrative output, which requires further review of the p-value and confidence interval |
| R² of Competitive Advantage | 0.472 | Interpret the model's explanatory level in context, with reference to (Hair et al., 2011) where appropriate |
The table above is illustrative output, not a result from your data. Do not copy these numbers into Chapter 4. For bootstrapping, (Hair et al., 2022) recommends 5,000 bootstrap subsamples. When concluding on a hypothesis, read the sign of the path coefficient, the p-value or confidence interval, the effect size, and the practical meaning together.
SPSS, SmartPLS, AMOS, JASP, and R differ in learning cost, interface, and reporting requirements. AMOS is suitable for CB-SEM and requires you to understand additional fit indices. JASP and R may reduce software costs, but they often require you to handle more of the workflow yourself. A service that runs SPSS may save time in the short term, but the risk is that you cannot explain how variables were created, indicators were removed, or output was interpreted when questioned. With your own .sav or .csv data, keep the original data file, syntax or operation history, and a record of every run.
Common mistakes when using this model
The first mistake is treating the five forces as five fixed independent variables for every topic. The model is a theoretical framework. You must show that the five groups fit the industry, respondents, and outcome variable.
The second mistake is using the name “competitive pressure” while writing indicators in terms of “competitive capability.” These are different ideas. One measures pressure from the industry environment, while the other measures the company's ability to create an advantage. If you need to measure both, separate them into different constructs.
The third mistake is taking a scale from the internet and translating it word for word without checking the context. An indicator that fits banking may not fit fashion retail or education. Pilot-test the questionnaire, review the terminology, and record every adjustment.
The fourth mistake is concluding that the “model is correct” simply because R² is high or a few p-values are small. Check the measurement model, multicollinearity, discriminant validity, and the meaning of the coefficients. A statistically significant relationship still needs to be explained through theory and the business context.
The final mistake is putting CFI, TLI, and RMSEA into a SmartPLS paper as though every SEM model uses the same criteria. These indices belong to CB-SEM according to (Hu and Bentler, 1999). When using SmartPLS, keep the PLS-SEM indicators separate and state the software, version, estimation method, and bootstrapping procedure clearly.
Frequently asked questions
What are Porter's 5 Competitive Forces and what do they include?
They are an industry environment framework covering rivalry among existing competitors, new entrants, suppliers, buyers, and substitute products or services. The model helps you identify the sources of pressure on a company's profitability and competitive position.
Can Porter's 5 Competitive Forces model be used for a quantitative thesis?
Yes. You need to turn each force into a construct, develop indicators, collect Likert data, and test the model using SPSS or SmartPLS. The Porter model itself is not a questionnaire or a statistical procedure.
Should you use SPSS or SmartPLS for a Porter model?
SPSS is suitable when you want to run Cronbach's Alpha, EFA, and regression on composite variables. SmartPLS is suitable when the model includes several latent variables and you want to assess both the outer model and structural model. Base the choice on the model, sample size, scale type, and your supervisor's requirements.
Do you need to include all 5 forces in the research model?
It is not mandatory. You can select the forces that fit your research question, but you must explain the basis for retaining or removing each component. If you use only three forces, the model name and literature review should reflect the actual scope of the study.
Where can you find scales for Porter's 5 Competitive Forces?
Look for studies measuring the same concepts in an industry or context close to your topic, then adjust the wording. There is no single questionnaire that fits every industry. You can present the scale design and assessment steps together with (Nguyễn Đình Thọ, 2011).
Open your proposal file and check three points now: does every force have a definition, does every hypothesis identify the dependent variable, and does every indicator use consistent coding? If you need to run the model on your own .sav or .csv file, M4 analysis from DoThesis supports the testing step with SPSS and SmartPLS.