Porter's Five Forces is the competitive-analysis framework the exam expects you to name, attribute and apply. It analyzes the structure of an industry, not an organization's internal position.
The five forces
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of substitute products or services
- Rivalry among existing competitors
Attribution
Created by Michael Porter, first published in a 1979 Harvard Business Review article.
The distractor names are all real people attached to real frameworks, which is what makes them work:
- Kaplan and Norton, balanced scorecard, 1992 Harvard Business Review article.
- Dave Ulrich, 1997 book on HR champions, associated with HR structural models rather than competitive analysis.
- John Kotter, 1995 Harvard Business Review article, the eight-step change framework.
Porter 1979 versus Kaplan and Norton 1992 versus Kotter 1995 is the pairing to lock down.
What the wrong lists actually are
- Cost leadership, differentiation and focus are Porter's generic strategies, not the forces. A list mixing them with scale and innovation is not the five forces.
- Political, economic, social, technological and legal factors are PESTLE-style environmental factors.
- Strengths, weaknesses, opportunities and threats are SWOT; adding "competitors" to that list does not make it Porter.
Applying it
A hospital system faces new low-cost urgent-care clinics treating conditions its emergency departments once handled exclusively. That is threat of substitute products or services: alternative providers meeting the same need through a different service model.
Distinguish carefully:
- Rivalry among existing competitors would be other comparable hospital systems, the same service form.
- Bargaining power of suppliers is the leverage of those supplying inputs such as equipment or labor.
- Bargaining power of buyers is patient or payer leverage over price and terms.
Carry this: same need met a different way is substitution; same need met the same way is rivalry.