How to use Porter’s Five Forces model for risk management

Porter’s Five Forces is a simple model that can help you to plan strategically for business success now and in the future.

The print industry, like many small business sectors, often relies on hard work, dedication and some good fortune to keep operations afloat. Many businesses operate reactively, hoping to cope with challenges only when they arise rather than preparing for them. This approach can work but can just as easily lead to significant setbacks when the unexpected arises, whether that’s an increase in the price of raw materials, a breakdown of the supply chain or something else entirely.

To build resilience and long-term success, printers need to adopt a structured, strategic approach. In the past, a powerful tool to guide this thinking is Michael Porter’s Five Forces model. Printers can apply this framework to assess their market position and set themselves up for sustainable growth.

What is Porter’s Five Forces model?

Michael Porter’s Five Forces framework can help businesses – including printers – analyse their competitive environment. By examining five key areas of influence, companies can understand their position within the market and identify strategies to strengthen their standing. The five forces are:

1. Competitive rivalry

This power is about the intensity of competition among existing competitors. In the print industry, competitive rivalry can be fierce. Small printers compete with large-scale printers, online print services and even smaller-scale DIY options like home printers. If competition is intense, profit margins can shrink, and businesses are forced to innovate or reduce costs to survive.

Without a strategy to build customer loyalty, you risk losing clients

As an example, an independent printer offering promotional materials might face stiff competition from a national online provider that offers lower prices. To combat this, the printer could focus on more personalised service, quicker turnaround times or eco-friendly options that help differentiate them from larger players. It’s important to regularly assess competitors’ offerings and identify USPs that set your business apart.

2. Threat of new entrants

This refers to the ease with which new competitors can enter the market. In the print industry, technological advancements and the spread of online platforms have lowered entry barriers, enabling smaller businesses to start with minimal investment.

A new local print shop can enter the market, undercutting your prices. Without a strategy to build customer loyalty, you risk losing clients. You can strengthen customer relationships by implementing loyalty programmes, exclusive offers and excellent service. Investing in unique capabilities, like custom-design software or environmentally friendly printing methods, can also make you stand apart from competitors.

3. Bargaining power of suppliers 

This refers to the influence suppliers have on prices and terms. Printers rely heavily on suppliers for substrates, ink and equipment. When suppliers hold significant power, they can raise prices or impose restrictive terms, squeezing margins.

For example, a printer may be faced with a 15% price hike from its primary substrate supplier. Without alternative options, the increased cost can affect profits or even lead to you making a loss. What can you do to counteract this? Strategies include diversifying suppliers to avoid overdependence or negotiating long-term contracts to lock in better prices. You should monitor market trends and consider bulk purchasing or forming buying groups or co-ops with other printers.

4. Bargaining power of customers

The power customers have to dictate pricing and service expectations wields significant influence in today’s print market, especially with access to online comparison tools and reviews. If they can easily switch providers, they gain leverage to demand lower prices or additional services.

Let’s say a corporate client demands faster delivery times without a price increase. The printer, desperate to retain the business, may agree, stretching resources and reducing profitability. However, by offering value-added services, such as consultancy or sustainability credentials, you can encourage customers to stay loyal despite cost pressures. Educating customers about the quality, environmental benefits or uniqueness of your offerings can also justify premium pricing.

5. Threat of substitutes

The availability of alternative products or services that could replace your offering poses a major risk, particularly as digital communication has reduced the need for traditional print materials. Customers might opt for email marketing or digital brochures over physical alternatives.

The biggest mistake printers can make is to hope or expect challenges will pass. In a competitive market, this approach will lead to disaster

If you’re a small printer specialising in business cards, you may see demand dropping as digital networking tools replace physical cards. One strategic approach is to diversify your offerings to include hybrid solutions, such as QR-code-enhanced print materials, or you could move to niches like luxury printing, which emphasise quality and craftsmanship over volume.

What next?

Porter’s Five Forces is not just an academic exercise. For print businesses, it offers a practical framework to think strategically, make informed decisions and avoid unexpected surprises. You can use the model effectively by starting regular strategy reviews, involving your staff. This allows you to step back from day-to-day operations and assess long-term challenges and opportunities. You should also measure key metrics, as strategy needs accurate data. Set some KPIs, such as production costs, profit margins, customer satisfaction and even environmental metrics like carbon emissions, and then track them.

You should also look to engage your team, plan for different scenarios and, perhaps most important of all, avoid complacency. The biggest mistake printers can make is to hope or expect challenges will pass. In a competitive market, this approach will lead to disaster. By thinking strategically and applying frameworks like Porter’s Five Forces, businesses can take control of their futures.