The Supply Chain Lens: A Practical Walkthrough for Industry Analysis

Most industry analyses treat the supply chain as a footnote—a tidy diagram of boxes and arrows that gets tacked on after the real work of sizing the market. That's wrong. The supply chain is where the five forces of industry competition actually play out. If you skip it, you're analyzing a market that doesn't exist. This walkthrough is for analysts, strategy leads, and procurement professionals who need to produce something decision-makers can act on, not a slide that gets politely ignored. We'll show you how we do it, in five steps, with the specific tools and numbers that matter.

1. Define the market before you map the chain

Before you can analyze a supply chain, you have to know what market you're in. Analysts define the industry, survey total sales and growth, and distinguish the total market from the strategically relevant market (SRM). That distinction is not academic. The global insights industry, for example, surpassed US$150 billion in 2024, but within that, the market research sector was only about US$56 billion (ESOMAR via Research World). If you're a supplier to research firms, your addressable market is a fraction of the headline number. The same logic applies to any industry. Start by asking: what is the total market, and what slice of it actually buys what we sell? Under EU competition law, the relevant product market comprises all products that customers regard as interchangeable or substitutable, with demand-side substitutability the most important criterion (European Commission). Use that as your test. If your customers can easily swap your product for another, you're in the same market—and your supply chain analysis needs to account for that.

2. Map the value chain, not just the org chart

Once the market is defined, map the value chain. Michael Porter introduced the concept in his 1985 book, dividing a firm's activities into five primary categories—inbound logistics, operations, outbound logistics, marketing and sales, and service—and four support categories: procurement, technology development, human resource management, and firm infrastructure (IBM Think). The point is to see where value is created and where costs accumulate. We've found that most teams skip the support activities, but that's where supplier power often hides. For instance, if your technology development depends on a single vendor's proprietary software, that vendor has power over you. The same goes for procurement: if you're locked into a long-term contract with a supplier, your switching costs are high, and the supplier knows it. Porter's 2008 article identifies customer switching costs as a key entry barrier—the fixed costs buyers face when they change suppliers, arising from altering product specifications, retraining employees, or modifying processes and information systems (Harvard Business Review). The larger those costs, the harder it is for new entrants to gain customers. So when you map the chain, mark every point where switching costs are high. That's where the chain has leverage over you.

3. Apply the five forces to each link

Now apply Porter's Five Forces—threat of new entrants, threat of substitutes, supplier power, buyer power, and competitive rivalry—to each link in the chain. The stronger the forces, the lower the industry's profit potential (CFA Institute). Don't just do this at the industry level; do it link by link. Suppliers are powerful when there is no good alternative to what they supply and when high switching costs make it hard for industry participants to play suppliers off against one another (Harvard Business Review). Buyers are strongest when they face few switching costs, can credibly threaten to integrate backward, or can play vendors against one another. Rivalry is most intense when competitors are numerous or roughly equal in size and power, and price competition is especially destructive because it transfers profits directly from an industry to its customers. We've seen teams miss this by analyzing only their own link. But a chain is only as strong as its weakest link, and profits often flow to the link with the least pressure. For example, in the global insights industry, the research software sector grew about 11.5% in 2024, while the mature market research sector grew only 4.8% (ESOMAR via Research World). That growth difference reflects the relative power of software vendors versus service providers. If you're a service provider, you're feeling the squeeze.

4. Quantify concentration and bargaining power

Numbers matter. Use the Herfindahl-Hirschman Index (HHI) to measure concentration at each link. The HHI is the sum of the squares of the market shares of each firm in a market; it approaches zero in markets with many small firms and reaches 10,000 in a single-firm market (US DOJ Antitrust Division). Under the US 2023 Merger Guidelines, a market is moderately concentrated when the HHI is between 1,000 and 1,800, and highly concentrated when it exceeds 1,800. If your suppliers are in a highly concentrated market, they have power. If your buyers are, they have power. We recommend calculating HHI for your top three suppliers and top three customers. If either group exceeds 1,800, you have a bargaining problem. For a concrete example, consider the US digital advertising market, which reached a record $258.6 billion in 2024, up 14.9% year over year (IAB/PwC). That market is dominated by a few platforms, so advertisers face high supplier power. If you're buying digital ads, you're dealing with a concentrated supply base. That's a force you can't ignore.

5. Anticipate what can go wrong—and adjust

What can go wrong? You can do all this analysis and still get blindsided by a substitute or a complement. A substitute performs the same or a similar function by a different means; videoconferencing is a substitute for travel, for example. When the threat of substitutes is high, industry profitability suffers. But complements—products or services used together with your offering—can also reshape the chain. Brandenburger and Nalebuff argue that complements should be treated as a sixth force on the same footing as substitutes, because they raise customers' willingness to pay (Yale SOM paper). A hardware industry needs a software industry to flourish. In our experience, analysts often miss complements because they're focused on competition. But in supply chains, complementors can be critical partners. For instance, if you're a market research firm, your complementors might be the software providers that make your data collection more efficient. If they raise their prices, your costs go up. So map both substitutes and complements, and monitor them. Also, remember that regulation can change the game. The ICC/ESOMAR International Code, established in 1977, is the trusted global benchmark for self-regulation in the research industry, and it's mandatory for Esomar members (ICC/ESOMAR). If you operate in that space, compliance isn't optional. Build it into your supply chain risk assessment.

Sources

• CFA Institute - https://www.cfainstitute.org/insights/professional-learning/refresher-readings/2026/industry-and-competitive-analysis
• ESOMAR via Research World - https://researchworld.com/articles/inside-the-153bn-insights-industry
• Harvard Business Review (Porter 2008) - https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy
• US DOJ Antitrust Division - https://www.justice.gov/atr/herfindahl-hirschman-index
• Brandenburger & Nalebuff (Yale SOM paper) - https://som.yale.edu/sites/default/files/2024-12/1-SYMMETRY-AND-THE-SIXTH-FORCE-THE-ESSENTIAL-ROLE-OF-COMPLEMENTS-Adam-Brandenburger-Barry-Nalebuff%202.pdf
• ICC/ESOMAR International Code - https://iccwbo.org/news-publications/business-solutions/iccesomar-international-code-market-opinion-social-research-data-analytics/