Proter Five Forces Model vs.

SWOT

Two approaches to analyze the business environment are to complete

1) An industry analysis such as Porter's Five Forces Model

2) A situation analysis such as a SWOT analysis.

A formal industry analysis such as Michael Porter's Five Forces Model is more
in depth than simply looking for trends and general industry information

Michael Porter's Five Forces Model can also help develop successful
marketing strategies.

Five forces combine to make up the business environment. By studying the

structure of and dynamics between these forces, one can discover
opportunities for improving upon the marketing strategies

By fully utilizing Porter’s strategic methods one can gain an even clearer
picture of the industry, resulting in sounder marketing strategies

SWOT Analysis

In a SWOT analysis you identify strengths, weaknesses, market opportunities

for your company, and threats to your business

One way to use the analysis is to develop marketing strategies that will
minimize the affect of weaknesses on your business while maximizing your
strengths

Ideally matching strengths against market opportunities that result from

competitors’ weaknesses or voids

Comparison

SWOT and Porter's Five Forces are aimed at slightly different goals

SWOT allows you to look at the interactions between the INTERNAL factors of
Strengths and Weaknesses and EXTERNAL factors of Opportunities and
Threats to develop action plans to:

1. Base Strategies - match strengths and opportunities to take

advantaged of "low hanging fruit" - those items that you are prepared
immediately to reap.

2. Survival Strategies - match weaknesses to threats so you can shore up

weaknesses to combat threats
 Expansion Strategies - match weaknesses to opportunities to shore up
weaknesses to opportunities to delve into new areas
3. Defense Strategies - match strengths to threats to make sure you
avoid the threats

Porter's Five Forces really looks at the market place to see who have the
power in the industry - the customers or the suppliers, the customer, or the
firm.

• It also looks at how strong the competitive forces are. It does so by

looking at the number of suppliers versus the number of companies
buying
• It looks at how easy it is to enter the market place given competitor
numbers, barriers to entry, potential for replacement technologies

While some of the information for SWOT and Porter's Five Forces analyses are
similar or the same, the context and structure of the analysis is different and
it's worthwhile using both as per the requirement.

• SWOT can be used for anything- Product, service, market, individuals

• Porters is usually used for Industry

Porter's Five Forces is more of an industry analysis - outside the firm, looking
in, versus SWOT is taken from the individual firm's perspective - inside
looking out. They meet in the middle.

Example:

Government/regulators for policy setting could use Porter's Five Forces to

look at an industry, but they wouldn't use SWOT unless they were looking at
something from an individual firm's perspective

But a government could do SWOT versus other governments - like China

looking at Russia to decide how to compete as a company. But this is done
very rarely.