5-Forces Assessments – This tool examines the relative strength of a business relative to the competitive and business environment of the business. Development of this model helps identify the most important areas of competitive forces in a given market. In the analysis, some businesses will find the threat of substitutes to be a far bigger threat than their existing competitors, for example. Alternatively, in a market that is considered to be more of a commodity, the bargaining power of buyers may be the dominant force and drive a focus on product or service delivery differentiation. In this analysis several forces may be dominant and others somewhat benign. This analysis will feed the threats in a SWOT analysis and can also highlight opportunities where competitors, buyers, suppliers, or new entrants have weak positions.
Innovation in existing markets is the key to winning in a 5-Forces competitive landscape. Outperforming rivals with compelling products, services and channels, eliminating the threat of new entrants with daunting barriers to entry, minimizing the risk of substitution through high customer loyalty or switching costs, or reducing buyers’ power by providing real and valued differentiation are great examples of strategies to win in a 5-Forces competitive market. And, when this innovation reaches a discontinuous level it can make the difference between continuing to compete in this 5-Forces market versus the transformation of the market into what has been called a “Blue Ocean Market” to be discussed shortly.