Porter 5 forces model: critical analysis

Résumé du document

The Porter's 5 Forces model is a simple but powerful tool which helps understanding how the business power is split between several partners in a business situation. This is useful, because it helps in understanding both the strength of the company's current competitive position, and the strength of a position it's looking to move into.
This tool was created by Michael Porter ‘to analyze the attractiveness and likely-profitability of an industry'. Since its publication, it has become one of the most important business strategy tools. Nevertheless, because of the constant evolution and diversification of the markets, new tools were created to better analyze all the data of a company's environment. We can therefore wonder whether the tool created by Michael Porter many years ago is still useable today.

Extraits

[...] Advantages Porter's model first and foremost helps a company to choose a strategic orientation by thinking through how each force affects it. Then, by identifying the strength and direction of each force, the company can quickly assess the strength of the position and its ability to make a sustainable profit in the industry. Porter's model is also a very powerful tool to assess an industry's competition level. The 5 forces model enables to analyze the rivalry which exists between competitive companies. [...]

[...] Porter's model is also dedicated to simple markets' analysis. Actually, an analysis of the five or six forces is much more complicated in a complex industry characterized by multiple interrelations, product groups and segments. Porter's works are also based on the idea of competition: it assumes each and every company is trying to get competitive advantages over other players in the market such as competitive companies, customers and suppliers. This model therefore doesn't take into consideration potential strategic alliances between different partners. [...]

[...] Porter's model also focuses on choosing a strategy in the field of existing markets. But it is also possible to create new markets, according to the blue ocean strategy. A company can therefore create a brand new demand and therefore strategically choose to tackle a new market niche. This strategy avoids having to deal with competitors. Finally, a problem with Porter's 5 forces model is that it is too global. It indeed focuses on large sectors of activity. To be more accurate, it is necessary to focus on a specific strategic segment. [...]

[...] In fact, Porter's theories are based on the economic situation in the 80s. This period was characterized by strong competition, cyclical developments and relatively stable market structures. Porter's models focuses on the analysis of the actual situation (customers, suppliers, competitors etc.) and on predictable developments (new entrants, substitutes etc). Competitive advantages develop from strengthening one's own position within this Five-Forces-Framework. Hence, this model cannot explain or analyze today's dynamic changes that have the power to transform whole industries. Today's markets are highly influenced by technological progress, especially in information technology, and are therefore much less predictable. [...]

[...] In this case, strategic decisions become more concrete and the product portfolio management becomes way easier. As a result, Porter's ideas have become just tools from the manager's toolbox. This tool is no longer the only or the most important tool. But it is not obsolete either. Rather it should be used in a company with new and traditional management techniques in order to gain the most comprehensive picture. [...]