What is the relevance of Michael Porter's 5 forces to modern day business?

Résumé du document

The term strategy is a word used by one and all. Companies employ it when they speak about their goals; individuals employ it with their carriers with regard to the strategy that they must follow in order to succeed, and so on. The concept of strategy is large, and it encompasses many goals. Some strategies include people want to earn money, to be the leader in their market, to win market shares, to succeed in private or professional life and so on. There are various tactics to reach these strategies. A famous economist, Michael Porter, talks about strategy, and the competitive advantage, and the connection between the two. In fact, a study of the competitive advantage permits one to reach the strategy.

Extraits

[...] Moreover, the five forces must be analyzed in terms of strategic business unit (SBU). The fact that companies have partnerships or form part of a group is not considering by the model. Services or products can be combined, and as consequence, the theory is not really efficient. That is what we will analyze in this assignment. In a first part, we will present the theory of Porter, the concept of strategy and see more precisely the five (or six) forces of Porter. [...]

[...] We can not say that the strategy of the group is the same as the strategy of The Body Shop International. The strategy of L'Oréal is to keep its position, to maintain its place of number one in the world of cosmetics. The strategy of The Body Shop International is to be number one in just one segment of the market of cosmetics, equity cosmetic. So the model of Porter cannot permit to analyze the two companies as one. Same thing for a company which have various activities. In general, great multinationals detent others companies. [...]

[...] According to Michael Porter, “strategy must have continuity. It can't be constantly reinvented”. It is right in all companies. The goal of a strategy is to be followed. If we change three or four times the strategy in one year for example, the company has any line, any goal very well defined. But it is important to underline that a strategy can change due to the external environment that we can not predict. In France for example, in the pharmaceutical sector, the government encourages French people to use generic drugs. [...]

[...] But in an internal level, it could be utile for the financial department Why can we call the Porter's theory into question? The Porter analysis is a good tool for industry in general, and companies. When we analyze more precisely all the aspects of the five forces of Porter, we can see that we have the competition, the suppliers and their bargaining, clients (their bargaining and their behaviors), the threat of new entrants, and then the substitute's product. On the contrary, the PESTEL analysis has a view more limited (Politic, Economy, Social, Technology, Environment and Legal). [...]

[...] Now, the new threat concerns Chinese. In fact, between 2003 and 2005, they increased by 30% their capacities of production by investing in new plants. In the 90's, China is the third exporter in the world. In 2006 and 2007, India enters into the market. Substitute products: steel was one of the raw material the most used in the industry. For cars, plastic, buildings, etc. Now, there are substitute products because of the price and the use of the steel. [...]