Stock analysis using Porter’s Five Forces: Model, Analysis, with Example
Written by Mariyam Sara
1 min read | Updated on October 09, 2025, 18:08 IST
Porter’s five forces model
Application of Porter’s Five Forces Framework in stock analysis
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.
Investors analyze a company before investing in its stock, this is called ‘Stock Analysis’. Stock analysis is the core of fundamental analysis, where you analyze the competitive landscape of an industry before making investment decisions. One method of performing stock analysis is using Porter’s Five Forces model.
In this blog, you will learn what Porter’s five forces model is, its application in stock analysis, and how you can use it to analyse stocks.
Porter’s five forces model
Michael E. Porter developed the ‘Porter’s Five Forces’ model, which helps to understand competitive intensity in an industry. Let’s understand Porter’s five forces in detail.
Rivalry in the industry
Rivalry refers to the existing competitors in the industry. If there is high rivalry in an industry, this can lead to price wars, which affect the profits of the company as the company has to lower its profit margin to capture customers and level with its competitors.
The threat of New entrants
In an industry, you need to check if it's easy for new competitors to enter the market. For example, in the retail industry, there aren’t any barriers to entry, which makes it easier for new players to enter the market and capture the existing company’s market share.
Industries like telecommunication and airlines have many barriers to entry, like government regulations, high capital requirements, and special licenses. This lowers the threat of new entrants in an industry.
Threat of substitutes
If the products manufactured by a company have many substitutes, this can make it easier for their customers to buy the substitute products instead of buying that company’s products. This makes it easy for the buyers to switch to the substitute products.
For example, Coca-Cola and Pepsi. If Coca-Cola decided to increase the price of its products, customers could easily switch to Pepsi, which offers a similar product at a lower price.
Bargaining power of buyers
The bargaining power of the buyers refers to their power to lower the price of the products of a company. If a company offers unstandardized and undifferentiated products, then the buyers can push down the price of the products since it’s easier for the buyer to switch to another seller.
Example: In the airline industry, the buyers have high bargaining power, where airlines have competitive prices, so that the buyers choose to fly with them.
Bargaining Power of Suppliers
The bargaining power of the suppliers refers to the ability of suppliers to drive up the price of the materials needed to manufacture the goods. If a supplier has a certain raw material that is high in demand and no other supplier possesses it, then they can raise the price of the raw material, increasing the production cost of the company.
Application of Porter’s Five Forces Framework in stock analysis
You can assess a company using Porter's five forces model. All you need to do is gather information regarding the five forces that influence competitiveness in its industry.
Rivalry in Industry
Find out the company’s existing rivals and the market share they hold. If there are many competitors, then check the company’s strategy to sustain or increase its market share.
Threat of new entrants
If there are many entry barriers in an industry, then existing companies can maintain their market share, and it can be easier for companies to become a price leader in the industry.
Threat of substitute products
A product having multiple substitutions makes it easy for buyers to switch and makes your product easily replaceable. Aim for companies that have a unique selling point and product differentiation.
Bargaining Power of Buyers
Find out the market share of the company, their target audience, the cost of switching for buyers, and the price sensitivity of buyers.
Bargaining power of suppliers
Find out the supplier company's sources for their materials, the cost of switching to alternative materials, and if the supplier possesses rare materials.
Porter's Five Force model help you analyse a company's competitive landscape which affects its stock performance. To learn more stock analysis techniques, sign up on UpLearn by Upstox today and become a smart investor!
About Author
Mariyam Sara
Sub-Editor
holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.
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