Analyze industry profitability, not a list of competitors. The five forces explain who can take value, why, and how the structure may change.

Complete the boundary test:

Test adjacent boundaries. If force conclusions reverse when one product, geography, or value-chain layer changes, analyze those arenas separately.

Map the value chain and estimate where revenue, cost, and profit pools sit. Keep complements distinct from substitutes and suppliers distinct from rivals.

Create a driver record for every force:

Inspect number and balance of rivals, growth, fixed or storage costs, differentiation, switching costs, capacity increments, strategic stakes, exit barriers, and competitive dimensions. State whether rivalry dissipates value through price, service, marketing, capacity, innovation, or another cost.

Inspect economies of scale, demand-side benefits, switching costs, capital, incumbency advantages, channels, regulation, expected retaliation, and the capabilities of likely entrants. Judge the threat from barriers plus entrant motivation—not from the absence of current startups.

Start from the buyer’s underlying need. Identify different ways to complete it, including internal work, manual work, outsourcing, delay, and adjacent categories. Compare price-performance and switching friction.

Segment buyers when concentration, purchase size, differentiation, switching, information, backward integration, price sensitivity, or product impact differs. Explain how buyers capture value: lower price, more service, risk transfer, or delayed payment.

Define critical input groups. Inspect concentration, uniqueness, switching, substitutes for inputs, importance of the industry to suppliers, forward integration, labor/capability scarcity, and pass-through ability. Explain the margin mechanism.

Use high, medium, low, or indeterminate only after recording:

force:
dominant_drivers:
countervailing_drivers:
economic_mechanism:
evidence_scope:
current_strength:
direction_of_change:
confidence:

A count of favorable and unfavorable bullets is not a force rating. The dominant economic mechanism controls.

Build an interaction table:

Look for structures such as:

Describe the current profit pool, the likely structural change, and who gains or loses value.

For each strategic response, state which force it changes or avoids:

Separate:

Set the hurdle before the verdict. Prefer sustainable return on invested capital relative to cost of capital and credible alternative arenas. When those data do not exist, use an explicit proxy—durable price–cost spread, cash contribution after required investment, or bargaining capture—and label the inference bounded.

Create the bridge:

Growth, market size, or a count of low forces cannot substitute for the hurdle. Indeterminate evidence on a dominant force prevents an unqualified attractiveness finding.

Deliver the boundary and value chain, five force driver records, force judgments, interaction map, structural-change outlook, profit-pool thesis, and positioning implications.

structurally_attractive

conditionally_attractive

structurally_unattractive

boundary_or_evidence_insufficient

Each conclusion names the mechanism and evidence; a five-part scorecard alone does not pass.

Foundation: Harvard Business School Institute for Strategy and Competitiveness.