How Does The Five Competitive Forces That Shape Strategy Work?

A company’s strategy is shaped by five strong forces that push and pull it like a game of tug-of-war.

Imagine you’re playing in a park with your friends. There are other kids wanting to join the game, some already playing nearby, and maybe even someone trying to take over the best spot on the field. That's like what happens with companies, they have to deal with five competitive forces:

• Other Kids Wanting to Join: This is like new competitors coming into the game. If more kids join, you might not be the center of attention anymore.
• Kids Already Playing Nearby: These are your existing competitors. They’re right there, fighting for the same space and fun.

• A New Game Being Invented: This is like a new product or service that changes how people play. If someone invents a cooler game, kids might all leave to try it out.
• The Playground Getting Bigger or Smaller: This is about suppliers and buyers. If there are more swings or fewer balls, it changes how the game works for everyone.

• You Can Make Rules or Change Them: This is like having the power to influence the game, maybe you can decide who gets to be the leader next time.