Appendix 3: Porter’s Five Forces Analysis Instrument

Identify the industry.

1. Identify the industry under analysis.
2. Place this in the instrument.

Analyze data about the industry environment.

Analysis is the process and result of examining all the data available for the firm and identifying and classifying all the data for each category in a strategic management framework.

1. Identify data in the case or from company research that corresponds to each force in the Porter’s Five Forces analysis: bargaining power of suppliers, bargaining power of buyers, threat of substitute products, threat of new entrants, and rivalry among existing competitors.
   1. The data needs to be specific to the case.
      1. For example: “The threat of [specific supplier] is high because [specific reason it is high].”
   2. The data needs to avoid being too broad.
      1. At this stage, avoid “The threat of suppliers is high.” You will analyze the strength of each force next.
2. Place the data corresponding to each force in the Porter’s Five Forces framework in the instrument below in the subsection titled “Identity Forces” in the “Analysis” section.
3. Rank the strength of each force: strong, moderate, or weak.
   1. Enter the strength of each force in the instrument below in the subsection titled “Rank Strength” in the “Analysis” section.

Interpret the analysis.

Interpretation is the process and result of examining the analysis to identify and explain relationships in the analysis and underlying root causes of the situation. Interpretation is not found in the case or company research. Interpretation applies critical thinking to the analysis conducted so far. Answer only those questions that add value to the overall process of working with the Porter’s Five Forces framework to analyze the industry environment. Interpretation begins to narrow the focus.

1. Identify and explain whether, how, and in what ways the information in the analysis is related.
   1. How does the analysis within each force of the Porter’s Five Forces framework relate to each other?
      1. How do the different levels of threats of new entrants relate?
      2. How do the different levels of threats of substitute products relate?
      3. How do the different levels of bargaining power of suppliers relate?
      4. How do the different levels of bargaining power of buyers relate?
      5. What are the patterns and relationships in the rivalries that exist between competitors?
   2. How does one force in the analysis in the Porter’s Five Forces framework relate to another force in the analysis in the Porter’s Five Forces framework?
      1. For example: How do the threat of new entrants and the threat of substitute products relate?
      2. For example: How do the bargaining power of suppliers and buyers relate?
   3. What elements in the Porter’s Five Forces analysis were expected?
   4. What elements in the Porter’s Five Forces analysis were unexpected?
   5. Are there incongruencies between the elements of the analysis in the Porter’s Five Forces analysis?
2. Identify and explain underlying root cause(s) of the situation.
   1. What may be causing the information identified in the analysis?
3. Place the interpretation in the instrument below in the section titled “Interpretation.”

Evaluate the analysis and interpretation.

Evaluation is the process and result of examining the analysis and interpretation to identify and explain the meaning of the information to the company by considering its impact, relevance, and importance to the company and by identifying the company’s current, potential, or needed assets, organizational capacity, and managerial ability that may support or mitigate the areas of highest impact, importance, and relevance for the firm. Like interpretation, evaluation is not found in the case or company research. Evaluation involves applying critical thinking to the analysis and interpretation conducted so far. Answer only those questions that add value to the overall process of working with the Porter’s Five Forces framework to analyze the industry environment. Evaluation continues to narrow the focus.

1. How does the information in the analysis and interpretation impact the company?
2. How is the information in the analysis and interpretation relevant to the company?
3. In what ways is the information in the analysis and interpretation important to the company?
4. What are the company’s current, potential, or needed assets, organizational capacity, and managerial ability that may support or mitigate the areas of highest impact, relevance, and importance for the firm?
5. Place the evaluation in the instrument below in the section titled “Evaluation.”

Recommend action to the firm.

1. What do you recommend to the company to leverage opportunities in the industry environment?
2. What do you recommend to the company to mitigate threats in the industry environment?
3. Place the recommendation(s) in the table below in the section titled “Recommendations.”

Analysis Instrument

Porter’s Five Forces analysis instrument