Porter's five forces: a worked example for a Vietnamese sneaker brand

Suppose a Vietnamese sneaker brand is about to launch a new model. Should it bet on price, on design or on the sales channel? The answer depends on where the pressure in the industry comes from, and Five forces separates each source of pressure from the others.

What are the five forces for?

The model answers one narrow question: how much profit does the industry leave to the average firm, and which force is taking it away (Porter, 2008). It describes industry structure. One company's own figures therefore cannot prove a force of the industry.

How do the five forces score for a Vietnamese sneaker brand?

In this example buyers and existing rivals score highest, and suppliers lowest. The levels (low, medium, high) and their reasons are assumptions made to show the method, with no market data behind them. In real work every reason needs a dated source.

If these assumptions held, the channel would decide a small brand's margin, and a good design without its own channel would still get squeezed on price.

What do you do with the scorecard?

Read the scorecard as a to-do list: where a force scores high, choose a move that weakens it. Porter treats strategy as either building defences against the competitive forces or finding a position in the industry where they are weaker (Porter, 2008). In this example, strong buyers call for selling direct and building repeat customers. Crowded rivalry calls for staying out of price competition at the most crowded price point.

Going deeper: where does the model come from, and what did Porter add later?

Porter first published the model in Harvard Business Review in 1979 (Porter, 1979) and developed it in his 1980 book on analysing industries and competitors (Porter, 1980). The 2008 article reaffirms the model and extends it (Porter, 2008). It explains why a fast-growing industry is not always a profitable one, how eliminating rivals through mergers can reduce the profit potential of the whole industry, how government policy changes the relative strength of the forces, and how to use the five forces to understand complements (Porter, 2008).