As a product manager, Porter’s Five Forces should be your go-to tactic to identify current or potential competition for your product.
Competitive research is not about feature wars. It’s about differentiation, value delivered, and competitive positioning. You can’t win a feature war — for every feature you have that they don’t, they have something you don’t. When customers ask how you differ, a feature list won’t convince them. You must position your product by driving them down the value chain in multiple ways.
Porter’s Five Forces framework breaks down the competitive environment into five dimensions that influence the state of a market and your business:
- Threat of new entrants
- Threat of substitutes
- Supplier power
- Buyer power
- Competitive rivalry
These forces shape your industry’s profitability and attractiveness, and as a PM, understanding them helps you anticipate pressure points and design your strategy accordingly.
The five forces that shape competition
1. Threat of new entrants
New companies entering your market increase competition and may force prices down or raise costs to maintain differentiation. Barriers to entry matter here — economies of scale, capital requirements, regulatory hurdles, customer loyalty, and access to distribution channels all protect incumbents.
In India, a startup in fintech must consider how hard it is for a new player to get banking licenses, build trust, and acquire users at scale. If barriers are low, the threat of new entrants is high and your product needs a sharper moat.
2. Threat of substitutes
Substitutes are alternative products or services outside your direct industry that fulfill the same customer job. The threat is higher if switching costs are low or if the alternative performs as well or better.
For example, if you build a paperboard packaging product, water as a substitute for quenching thirst is a reminder: sometimes the competition is outside your category. Indian consumers switching from taxis to Ola, or from offline classes to YouTube tutorials, show how substitutes can disrupt markets.
3. Bargaining power of suppliers
Suppliers can influence your costs and quality if they are few, concentrated, or hold unique resources. If your product depends on specialized components or data providers, suppliers have leverage.
In India’s SaaS ecosystem, if your platform relies on a single cloud provider with no alternatives, supplier power is high. This affects pricing, reliability, and your ability to innovate.
4. Bargaining power of buyers
Buyers influence your pricing and terms when they are concentrated, knowledgeable, or can easily switch. Large enterprise customers or aggregators can demand discounts or customizations.
For example, a B2B SaaS startup selling to Indian banks faces strong buyer power, as banks negotiate hard and can switch vendors if switching costs are low.
5. Competitive rivalry
This is the intensity of competition among existing players. If many competitors offer similar products, with low differentiation and low switching costs, rivalry is fierce.
Indian telecom providers like Airtel, Jio, and Vodafone face intense rivalry, leading to price wars and rapid innovation.
Product strategy meeting at a Series B SaaS startup in Bangalore
You (PM): “Let’s apply Porter’s Five Forces to understand where the competitive pressure is highest.”
CEO: “New entrants are popping up fast. What barriers do we have?”
Head of Sales: “Our buyer power is limited — the big banks negotiate hard, and switching costs are low.”
You (PM): “Our supplier is a single cloud provider, so supplier power is high too. But substitutes aren’t a big threat yet.”
CTO: “Competitive rivalry is intense. We need to differentiate beyond features.”
This exercise helped the team focus strategy on building switching costs and exploring alternative suppliers.
Understanding which competitive forces hurt your product most guides where to invest and defend.
Why feature comparisons fail as competitive research
Ask any product, marketing, or sales person for a competitive comparison and you’ll often get a feature matrix. Features represent how a product works, but not why customers choose it. Contextual competitive analysis goes deeper: it compares customer business situations and the impact your product delivers versus competitors.
Features come and go. A competitor can copy your newest feature in weeks. But your customer relationships, pricing model, integration depth, and brand reputation are harder to replicate.
In India, companies like Razorpay and Meesho succeed not because of unique features, but because of superior integration into local payment flows or reseller networks. Your competitive research must look beyond features to understand value delivery.
How to apply Porter’s Five Forces to your product
Start by listing the factors for each force in your market:
| Force | Key Questions | India Context Example |
|---|---|---|
| Threat of new entrants | How hard is it for startups to enter? What barriers exist? | Regulatory licenses in fintech, capital in hardware startups |
| Threat of substitutes | What alternatives compete for the same customer job? | WhatsApp vs SMS, offline classes vs YouTube |
| Supplier power | Are suppliers concentrated or unique? Can they raise prices? | Cloud providers, payment gateways |
| Buyer power | Are buyers large, consolidated, or price sensitive? | Large Indian enterprises, government contracts |
| Competitive rivalry | How intense is competition? How differentiated are products? | Telecom industry price wars, crowded e-commerce apps |
Evaluate each force’s intensity: high, medium, or low. This helps you identify which forces to focus on in your strategy.
Strategic responses to the five forces
- Raise barriers to entry: Build strong brand, network effects, proprietary data, or exclusive partnerships.
- Mitigate substitute threats: Differentiate on user experience, bundle offers, or educate customers on your value.
- Manage supplier power: Diversify suppliers, negotiate long-term contracts, or vertically integrate.
- Reduce buyer power: Increase switching costs via integrations, loyalty programs, or proprietary workflows.
- Outmaneuver rivalry: Innovate on business model, target underserved segments, or improve operational efficiency.
For example, Swiggy built a vast delivery network and quick service to create switching costs that deter both new entrants and substitutes like traditional restaurants.
Field exercise: Apply Porter’s Five Forces to your product
- List your product’s market and main competitors.
- For each of the five forces, answer these:
- What factors increase or decrease the force’s intensity?
- How strong is the force: high, medium, or low?
- Identify which force is the biggest threat and which is the biggest opportunity.
- Write down one strategic action you can take to address each force.
Test yourself: Competitive forces at an Indian SaaS startup
You are a PM at a Series B SaaS startup in Mumbai selling a workflow automation tool to Indian enterprises. The market has a few established players, and new startups are entering. Suppliers are mostly cloud providers, and buyers are large corporations with negotiating power.
The call: Which of Porter’s Five Forces poses the greatest threat to your product’s growth, and what strategic moves do you recommend?
Your reasoning:
You are a PM at a Series B SaaS startup in Mumbai selling a workflow automation tool to Indian enterprises. The market has a few established players, and new startups are entering. Suppliers are mostly cloud providers, and buyers are large corporations with negotiating power.
Your task: Which of Porter’s Five Forces poses the greatest threat to your product’s growth, and what strategic moves do you recommend?
your reasoning:
Where to go next
- Understand how to frame product vision and strategy: Product Vision and Strategy
- Learn methods for user research that inform competitive positioning: User Research Methods
- Explore frameworks for assessing product opportunities: Assessing Product Opportunities
- Master how to measure product success with metrics: Metrics and KPIs