Auditing an Existing Five Forces Analysis for Quality
When a client hands me a fully drawn Five Forces model, I never start by asking if the conclusions are correct. I ask: “What evidence supports this assessment?” That question alone reveals whether the model is built on intuition or informed insight.
You’ve likely seen models where the threat of new entrants is labeled “low” with no supporting detail beyond “no major players are coming.” That’s not analysis—it’s a guess wrapped in a square box.
As someone who’s spent two decades guiding strategy teams through market analysis, I’ve learned that the real test isn’t how many forces you identify, but how deeply you’ve interrogated each one. A strong analysis doesn’t just list factors—it justifies them. It anticipates counterarguments. It flags assumptions.
This chapter gives you a hands-on validation checklist to review any Five Forces model for completeness, logic, and evidence. Whether you’re evaluating your own work or auditing a colleague’s, this framework ensures your competitive analysis stands up under scrutiny.
Why Audit Competitor Analysis?
Even expertly built models can be flawed. Misjudged supplier power, overstated substitution threats, or blind spots in buyer behavior can steer strategy off course.
Too often, teams treat Five Forces as a one-off exercise—complete the diagram, present it in a slide deck, and move on. But strategy isn’t static. The market changes. A model built last year may no longer reflect reality.
Regular audits are not a luxury—they’re a necessity. They protect you from overconfident conclusions and ensure your strategy is grounded in observable, defensible insights.
When Audit Competitor Analysis Is Most Critical
- Before presenting findings to executives or investors
- When a business unit resists strategic recommendations based on the model
- After a major market shift: a new entrant, a regulatory change, or a technological disruption
- When combining Five Forces with other frameworks like SWOT or PESTLE
Four Pillars of a High-Quality Five Forces Model
Every robust competitive model rests on four pillars. If any one is weak, the entire structure risks collapse.
1. Completeness of Force Coverage
Start by checking whether all five forces are present, and whether each is framed as a dynamic pressure, not a static label.
A common error is reducing “threat of new entrants” to a single sentence like “It’s hard to enter this market.” That’s not a force—it’s an opinion.
Instead, the force should be articulated as a measurable competitive pressure: “The high capital requirements and regulatory hurdles create a significant barrier to entry.”
2. Logical Consistency Across Forces
Forces do not exist in isolation. A strong model shows how changes in one force influence others.
For example: If buyer power is high, it may reduce the need for differentiation, which in turn lowers the threat of new entrants. Conversely, if supplier power is strong, that may increase switching costs and reduce buyer leverage.
Ask: “Does this assessment create a coherent market picture?” If the forces contradict each other—e.g., high buyer power but low threat of substitution—dig deeper.
3. Evidence-Based Justification
Every assessment should be tied to specific data points. Evidence isn’t just “industry reports”—it’s citing a study, a market share statistic, or a price elasticity figure.
For example: “The top three suppliers control 72% of the market, giving them strong bargaining power.” That’s evidence. “Suppliers are powerful” is not.
When evidence is missing, ask: “What would prove this claim?” If you can’t answer, the analysis remains speculative.
4. Strategic Relevance
A model can be logically sound and evidence-rich but still fail to inform strategy.
Ask: “How does this insight lead to action?” A high threat of substitution isn’t just a diagnosis—it means you must innovate, differentiate, or exit the market.
Every force should point to a strategic implication. If it doesn’t, it’s decorative, not analytical.
Step-by-Step Validation Checklist
Use this checklist to audit any Five Forces analysis. Score each item from 1 (weak) to 5 (strong), then calculate the total. A score above 18 indicates a high-quality model.
| Checklist Item | Score (1–5) |
|---|---|
| All five forces are clearly defined and named. | |
| Each force is framed as a competitive pressure, not a statement of fact. | |
| Every assessment is supported by data, source, or logical reasoning. | |
| Assessments are consistent across forces (no internal contradictions). | |
| Each force links to a strategic implication or action. |
Interpreting Your Score
- 1–12: The model needs significant revision. Evidence is missing, forces are mislabeled, or logic is inconsistent.
- 13–16: Moderate quality. Some forces are well-justified, but others are superficial or lack strategic relevance.
- 17–18: Good quality. Most forces are supported and coherent, but minor improvements could elevate it to expert level.
- 19–25: Excellent. The model is thorough, evidence-driven, and strategically actionable.
Common Pitfalls and How to Fix Them
Even experienced analysts fall into traps. Here are the most frequent ones—and how to avoid them.
1. Over-Reliance on Intuition
“It feels like supplier power is high.” That’s not analysis. Ask: “What data supports this?” If there’s none, you’re guessing.
Fix: Replace “high” with “moderate” or “low” only after identifying at least one data point—e.g., “Only 2 suppliers serve 80% of the market.”
2. Confusing Threats with Realities
“New entrants are not a threat” is a conclusion. But if the entry barrier is low and new startups are appearing, you’re wrong.
Fix: Use the “threat” label only if you can justify the likelihood and impact. Ask: “What would trigger entry? What resources would they need?”
3. Ignoring Feedback Loops
High buyer power reduces your ability to raise prices. That, in turn, reduces your investment in innovation. Lower innovation increases the threat of substitution.
Fix: Map how forces influence one another. Use arrows in your diagram to show causal relationships.
4. Treating the Model as Static
Five Forces is not a snapshot. It’s a living model. A high threat of substitution today may not be tomorrow if a new patent blocks a substitute technology.
Fix: Add a “Time Horizon” column. Label each force as “increasing,” “stable,” or “decreasing” over the next 3 years.
Review Business Model Quality: A Proven Framework
I’ve used this audit process in over 40 client engagements. The results are clear: high-quality analyses lead to better decisions.
Here’s a real example: A SaaS company believed buyer power was low because customers had no immediate alternative. But after auditing the model, we discovered that customers could switch with low effort due to API compatibility and open-source alternatives. That shifted the assessment to “high” buyer power—and prompted a pricing restructure that improved retention.
Always ask: “Would this analysis hold up in a boardroom?” If the answer is no, you need more evidence.
Review business model quality not as a ritual, but as a requirement. Every time you deploy a Five Forces model, treat it as a hypothesis to be tested, not a truth to be declared.
Frequently Asked Questions
What’s the fastest way to audit a Five Forces model?
Start with the checklist. Focus on evidence. If a force lacks supporting data, flag it and investigate. A quick audit should take 20–30 minutes for a standard model.
Can I rely on secondary sources for evidence?
Yes—but always verify. Market reports from Statista, McKinsey, or IBISWorld are acceptable. But don’t treat them as gospel. Check the methodology, date, and scope. Ask: “Does this data apply to my specific market segment?”
How do I audit a Five Forces model with limited data?
Use proxies. For example, if you don’t have market share data, use revenue trends, employee counts, or patent filings. Acknowledge the uncertainty in your assessment. Frame it as “likely high” or “moderate, based on industry trends.”
Should I audit Five Forces models in real time or only after completion?
Audit after completion is essential. But begin with a draft review: every time you add a force, pause and ask: “What supports this?” This prevents confirmation bias and ensures quality from the start.
What if my analysis contradicts a competitor’s model?
That’s normal. Markets are complex. The goal isn’t agreement—it’s rigor. Compare assumptions, data sources, and timeframes. Disagreements often reveal deeper insights.
How often should I audit a Five Forces model?
Annually is ideal. But after major events—like a merger, new regulation, or a disruptive technology—audit immediately. The model should evolve with the market.
