The Porter 's Five Forces tool is a powerful and useful tool for analyzing an industry structure and its corporate strategy. It helps companies and firms to comprehend where its power lies in a business situation. Also, it is very important to apply these Five Forces tool to understand the strength of the firm 's current competitive position and the advantages of considering moving into the target market. The tool is conventionally used to identify whether the new products or services of the business has the potential to generate profit.

The Five Forces Analysis assumes that there are five important forces that determine the competitive power in a certain business situation. These includes the Threat of New Entrants, Threat of Substitutes, Bargaining Power of Suppliers, Bargaining Power of Buyers, and The Competitive Rivalry Within the Industry.

The first force, threat of new entrants, discusses about the possibility of losing market share and profitability of existing competitors when new competitors engage in the marketplace. This may result in alterations to the existing product price levels and quality. Before Selecta entered the ice cream market, Magnolia is the monopoly of the Philippine ice cream market. During this time, the entry barriers were quite high and was quite impossible for new industries to engage in the market. New industry players will have to tackle high capital to start up. Also, Selecta is a dying brand not until in 1990, where RFM inc. bought