How to apply Porter’s Five Forces to market research?

by Dr. Alan September 11, 2020

Porter’s Five Forces is a market research model that gives an accurate report of competitive forces that shape an industry. It is an essential part of every B-school curriculum, giving students better insight into corporate strategy.

Marketing students must be familiar with the five forces, but do you know how to use them in a market research assignment? Well, that is what I am here to help out with! Read on to know all about Porter’s Five Forces and its practical application.

Understanding Porter’s Five Forces

Porter’s Five Forces first made an appearance in Michael E. Porter’s book “Competitive Strategy: Techniques for Analysing Industries and Competitors” in 1980. And soon enough, the Five Forces became a widely accepted model for calculating the internal and external factors affecting competition.

With the Five Forces, students can measure the demand-supply ratio in a particular industry. It also provides an accurate description of the competitive forces and their effect on the brand’s marketing policy.

Let’s discuss what these five forces are and how it impacts a business model.

Students can logically prove the success rate of a proposed advertising strategy with Five Forces.

Current competition

Current competition refers to the number of companies that exist when you enter the market. These business holdings have an added advantage over the new brand. They are already familiar with customer preferences and can even impact their buying decision.

Experience and expertise are two assets that brands earn over time. However, the modern-day customer is more open to the idea of choosing alternative brands. Brand loyalty is a rare phenomenon.

Competition analysis works on both micro and macro scales. With Porter’s Five Forces, you get to list all the large-scale companies and independent competitors that threaten your business.

Potential/future competitors

Now that you know about the present competitors look for possible brands that might enter the market. Research about the market conditions and economic environment of the country. Also, track the demand trends and supply in the industry.

Every brand conducts an in-depth analysis of the market to understand if their product/service would fetch a profit or not. A booming industry doesn’t just attract more business but also more competitors.

Keeping an eye out for potential competition is a right wakeup call. It keeps businesses in check and ensures that they don’t become complacent.

Supply power

Supply power refers to the availability of products and services in the market. This is the part where you learn about how accessible your brand is. Here, the marketing students can also record the suppliers, wholesalers and middlemen involved in the process.

With each new addition to the supply chain, there is an increase in the final cost. Therefore, for a business to thrive, it is important to find cheaper alternatives to switch over to.

Customer power

Customer power refers to the buying trends and control of the brand’s target audience. The active market research gives you enough insights into the customer demographic and income range. Based on these insights, you can calculate the cost of the product and its success rate in the market.

Marketing students can even analyze customer metrics to figure out the niche needed to boost sales. Analytical tools, online lead generation and social media networking, give you valuable data on customer engagement with the brand.

Threat of substitution

Gone are the days when a single brand or company ruled over the market. Today, the competition is intense, with more and more players entering the industry. In such a scenario, business holdings really need to pull their socks up, if they want to stay afloat and relevant

The threat of substitution happens when the customer shifts from brand A to brand B. This can happen due to several reasons like low pricing, extra incentives or aggressive marketing.

  • How accessible is the brand to the customer base?
  • Is it easy to find an alternative to the brand?
  • How unique is the product/service?
  • How much cheaper is the alternative?
  • And how can the substitute affect the company’s ROI?

These are a few questions marketing students ask to track data on customer preferences.

SEO strategies are a vital aspect of content marketing

Applying Porter’s Five Forces

Now that you know all about the Five Forces let us move the discussion to how they fit into market research. Competition analysis is essential for every business venture, irrespective of its size, scale, or sector. Here is how you can conduct and apply Porter’s report to the next marketing assignment.

Step 1: Data collection

Data collection is the first step to Porter’s Analysis. Most marketing assignments give you the preliminary information that you can build from. In some cases, students might have to conduct surveys or use analytical tools.

Always check the credibility of your source and cite them. I would recommend students to add marketing studies from recognized institutes. Most universities accept Harvard or APA referencing styles as they suit stat-based reports.

Step 2: Sorting information

Once you have all the information about the market, you need to sort through it and filter out the relevant details. Students can use database management tools to categorize the data. Based on the filters, you get a distilled report which is better suited to the brand’s needs.

Here, you can also include tables, numbers, charts, and infographics to build on your hypothesis. Students usually rely upon the premise for their market research in this section. However, it is in the data analysis section (which comes next) that you solidify your argument.

Step 3: Data analysis

Data analysis is when you observe the sorted data for patterns and recurring trends. Marketing research is all about identifying the business objectives and substantiating it with numbers. For instance, if you plan to apply the Five Forces in a cosmetic brand, you need to clarify the target customer demographic and location.

Here, students review what the real competition offers and how your brand can add on to it. Data analysis helps you evaluate the effectiveness of a business decision. In simple terms, students can logically prove the success rate of a proposed advertising strategy with Five Forces.

Step 4: Gathering insights

After you analyze the data, you can present the results and ideas gathered from the study. Here, students usually reinstate their hypothesis and then try to prove/disprove it. A hypothesis is basically a statement to express the critical argument or direction of your research.

You can then paint the complete picture of the competition, taken from insights collected after Porter’s analysis. And based on these findings, students can figure out a custom-made marketing strategy to target your ideal customer.   

Step 5: Implementation

The last step is when the student suggests ways to implement the strategies so derived after Porter’s Analysis. This is usually the final section of the market report, where you can even discuss the future trends that impact/influence the brand’s performance.

Of course, in the real-life scenarios, the marketing team also records and analyses the results derived from the campaigns. Methods like A/B testing are popular to try out two different strategies on two sets of audience. A comparative study of the results can then add on to your research.

Integrating Porter’s Five Forces

Porter’s Five Forces is relevant even for modern-day marketing strategies. The advent of technology and e-commerce trend make competition analysis all the more critical. Here’s how you can integrate Porter’s Five Forces in the digital marketing environment.  

SEO marketing

SEO or search engine optimization is more than just adding a few keywords/phrases to your content. It is a holistic process that tries to enhance a brand’s web presence, making it more accessible to the target audience.

Search engines like Google want content/websites that are credible, authentic and add value to the user’s browsing experience. Students can apply the Five Forces to understand the marketing strategies of the competing companies. Analyze the other brands working in a similar line of business.

Tools like Ahref gives you accurate insights into the keyword rankings. A small-scale venture can check if a particular keyword has more demand/competing. Picking less competitive search terms increases the chances of getting noticed.

Content marketing

Business holdings prefer e-commerce because it provides more exposure and earning opportunities. SEO strategies are a vital aspect of content marketing. However, CRM solutions focus more on content creation and promotion.

With Porter’s Forces, business holdings get insights about the present and potential competitors in the field. Marketing students can apply this analysis to digital marketing firms, web stores, e-ventures etc. There are analytical tools for comparative reports on how the brand’s blogs/web content/videos are faring online.

Evidence-based practices in nursing offer more than therapy and medication to the patient.

Social media marketing

Social media networks give brands a considerable boost in there online following and business. In fact, Facebook and Instagram now have dedicate features to promote e-commerce. Marketing courses cover these modern-day aspects as well in competition analysis.

With Porter’s Five Forces, brands can understand which products/services rank on social media. It also provides in-depth insights into customer metrics, engagements, and the kind of demographic a business attracts.

Need for Porter’s Five Forces

Market research prepares a venture for what’s to come. Gone are the days when a company or a group controlled the market. Today, we have new companies entering the market every other day. Ecommerce and online marketing further dilute the competition.

In such a scenario, anyone who wants to launch their brand must first gauge the competition. With Porter’s Five Forces, you can understand the internal and external forces that affect the market competition.

I hope that these pointers on the Five Forces were insightful for students who want some assistance with their next market research paper.

Quick links and references

Listed below are Porter’s Five Forces templates, research papers and analysis reports, you can refer to and cite in your project.

Porter’s Five Forces of Competitive Position Analysis

Porter’s Five Forces to Marks and Spencer

Basics of in-text citations- Purdue OWL course

Hypothesis testing in marketing research   

The bottom line

Writing a marketing research report from scratch is no child’s play. Porter’s Five Forces cover the competition-based study and analysis for your assignment. It adds more niche to your project, making it credible and realistic.

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