Have you ever wondered why some businesses thrive while others drown in competition? Or why sometimes, even though your product is good, it simply doesn’t take off?
The answer isn’t always in what you do, but in the environment where you play. That’s why today we’re going to talk about a model that has stood the test of time and continues to be a compass for entrepreneurs who want to understand, compete, and grow strategically: Porter’s 5 Forces.
Porter’s 5 Forces are a strategic analysis model that evaluates the competition and profitability of an industry through five key factors.
Michael Porter, a Harvard professor, designed this model in 1979 with a clear purpose: to understand how competition really works in any industry. Because it’s not just about “who sells the same thing you do,” but about many other elements that affect the success of your business:
Threat of new entrants
Bargaining power of suppliers
Bargaining power of customers
Threat of substitute products
Rivalry among existing competitors
These forces show you who has the power in your market and how easy or difficult it will be to win a slice of the pie.
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You launch an “innovative” business and suddenly... three more pop up with the same idea. Sound familiar?
The ease with which others can enter your market is one of the biggest invisible threats. If it’s cheap and fast to compete with you, get ready for some sleepless nights.
For example, in Colombia, competing against giants like Movistar or Claro in telecommunications implies an enormous entry barrier for a new company.
So, if you’re just starting out, look for markets with moderate entry barriers and real opportunities to differentiate. If you’re already in, think about how to create your own barriers: strong branding, customer loyalty, proprietary technology or underserved niches.
If your supplier has something exclusive (a software, a rare raw material, technical expertise) or there are simply very few options in the market, they have the power to raise prices or impose conditions.
This not only affects your margins, but also your ability to operate. Ideally, diversify suppliers, build long-term strategic relationships and, if possible, reduce dependency by developing internal solutions or collaborative alliances.
The customer is always right… but do they also have the control?
When your clients have many options or your product isn’t differentiated enough, the power is in their hands. That means demands, discounts and threats to leave for the competition.
The solution? Differentiation, added value, and loyalty. A satisfied, well-served client with exclusive benefits won't leave just for a lower price. Do you offer a hard-to-replicate service? Perfect! That’s your shield against buyer pressure.
You’re not only competing with those who offer the same thing. You’re competing with those who satisfy the same need, even if it’s done differently.
Example: a cereal bar competes with fruit, cookies, a smoothie… or nothing, if the customer decides to fast. The key here is understanding your customer’s true motivations and anticipating them.
Are your users shifting toward other ways to solve their problem? Adapt before you disappear. Innovate, follow trends, add extra value or even launch your own substitute—it may be more strategic than resisting change.
Are you in a never-ending price war? Does a new promo show up every week that forces you to react?
High rivalry in a market erodes profitability. And it worsens when there are many players, little differentiation and a stagnant market.
The key is to get out of the head-to-head fight. Find a niche, tell a different story, improve customer experience. Innovation, personalization and collaborations can be effective ways to compete without killing your margins.
Having the model is just the beginning. Here’s a quick guide to applying it to your business and helping you reach your financial goals:
Be specific. Don’t say “food,” say “healthy snacks in natural stores in Bogotá.”
Research how many competitors exist, how easy it is to enter, how many suppliers you have, etc.
High, medium or low? Be honest and realistic.
Link each force to a real situation you’ve experienced or are facing.
Sometimes, one force amplifies another. Identify patterns.
Don’t stop at the diagnosis. Use that information to make smart decisions.
Hypothetical example: Finanza Joven, a fintech for freelancers
Imagine a startup called Finanza Joven, a digital payments app focused on freelancers and digital creators. The founders are about to scale and decide to apply Porter’s model to make more strategic decisions:
Threat of new entrants: Entering the fintech sector requires meeting government regulations. User trust is also a key barrier. The company notices new players entering and decides to invest in security certifications and form alliances with banks to gain credibility and stand out.
Supplier power: They use cloud servers and payment networks like Visa. There are options, but some dominate. The strategy: diversify suppliers and negotiate rates as their user base grows.
Customer power: Their users are young, digital, and demanding. They switch apps easily for better commissions. That’s why Finanza Joven focuses on loyalty through exclusive features, like financial education and premium support.
Threat of substitutes: They compete with banking apps, startups, and crypto platforms. Their edge: offering a more integrated and visual experience, with tools tailored for their niche.
Current rivalry: High. Many apps compete through marketing and features. The key lies in focusing on the freelance niche and partnering with complementary platforms instead of reinventing everything.
As a strategic tool, Porter is a powerful compass, but not a crystal ball. It clarifies your competitive environment and forces you to look beyond your company.
It’s especially useful for entrepreneurs who want to make decisions based on real market conditions, not just gut feeling.
Gives you a clear structure to analyze your environment.
It applies to both big and small businesses.
Helps detect hidden opportunities.
Forces you to look beyond yourself (customers, suppliers, market).
It can become outdated if not refreshed.
Doesn’t consider macro factors (economic, social).
Not always applicable to hybrid or disruptive industries.
Underestimates strategic cooperation as a competitive tool.
This model isn’t just a PowerPoint exercise to file away. It’s a living tool to make better decisions. Here are some practical tips for truly applying it:
Use the model before launching: if you're about to enter a new market or launch a product, first analyze how intense the competition is or how powerful your suppliers are.
Be specific in your analysis: define your sector well. Don’t say “technology,” say “finance apps for freelancers in Latam.”
Do it as a team if possible: each person brings a different perspective that could reveal hidden forces or new opportunities.
Connect the analysis with action: if you see substitutes gaining ground, don’t just note it—innovate, pivot, or adapt your product.
Review the analysis regularly: the market changes quickly. What’s an opportunity today may be a threat tomorrow.
Porter’s 5 Forces is a reference model to understand the competitive landscape you operate in. It shows you who holds the power, where the risks are, and how to protect your business smartly.
But strategy doesn’t live on its own. You also need to keep your financial environment under control: expenses, income, margins.
And that’s where DolarApp comes in—the tool that helps you operate with stability in an increasingly volatile economic environment.
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