Porter’s Five Forces is a fundamental framework that describes the competitive environment. Which competitive environment? Actually, all of them. The basic simplicity of the Five Forces Analysis is what makes it so useful, and why it has become a staple of business and management studies over the past 30 years. If done properly, the Five Forces Analysis can accurately describe any competitive environment at any level.
This article about Management/Economics was written by one of our expert writers. If you are looking for an article on Management, Marketing or Economics, PrivateWriting is your best bet. Order now and our professionals will write the article you need in accordance with all your requirements.
The visual representation of the Five Forces is most likely familiar to most management students.The degree of competition in a particular market or industry is determined by four primary forces, which are described in relative terms such as strong or weak, or low-medium-high. One thing that may be misleading about the Five Forces framework is that in its familiar form as shown here, it gives the impression that the four forces that affect the intensity of competition act separately when in fact they are all interconnected in sometimes complex ways. In fact, the intensity of competition itself has an effect on the strength of the four forces that define it, which is why the analysis is called the Five Forces.
The easiest way to understand what each of the Five Forces is describing is to think of them in the simple context of what would make each of them “strong” or “weak”:
|Factors Contributing to Strength||Factors Contributing to Weakness|
|Power of Buyers||
|Power of Suppliers||
|Threat of Substitutions||
|Threat of New Entrants||
|Intensity of Competition||
These factors are simple examples and are certainly not the only ones that play a role, but should illustrate, at least, how the strengths and weaknesses can affect one another.
The Five Forces analysis is most often used as a tool for external, i.e., third-party analysis of a competitive environment, which is not surprising as it was developed from a thoroughly academic perspective – Michael Porter first devised the Five Forces analysis during his work at the Harvard Business School in the early 1980’s, and despite his characterizing it as a “strategic management tool”, the methodology has never quite shaken off its textbook charm. In actual practice, the Five Forces analysis is too basic for use as a strategic planning aid for established companies; to put it rather indelicately, if a company is lacking the information a Five Forces analysis provides about its current industry or market, the company probably has more problems than can be solved by the analysis. The Five Forces analysis is, however, a very good assessment to conduct when considering entry into a new market, and is usually included in properly-written business cases.
The most important thing missing from the Five Forces analysis is any sort of internal perspective, which other assessment tools such as the SWOT analysis do take into consideration. That is not necessarily an oversight – Professor Porter’s focus was on the competitive environment, and from that perspective the Five Forces analysis is set in the proper context – but one criticism that has sometimes been raised in the years since it was first developed is that the Five Forces analysis provides only vague and weak links between the external and internal environments. That can be a problem because the internal environment and activities of the firm do have an impact on competitive forces; without the use of a complementary analysis tool, the Five Forces analysis by itself does not identify or assess what that impact may be.
Another potential difficulty in making productive use of the Five Forces analysis is that its conclusions are qualitative; the strength of the various forces can only be described in a relative way, and are subject to interpretation. For example, a relationship between an auto manufacturer and a tire maker that supplies the tires for all the automaker’s new cars could be described in a couple different ways in a Five Forces analysis:
For the student researcher or market analyst, then, the challenge is to fully investigate the underlying conditions that make a particular force “strong” or “weak”, and justify a conclusion that does not contradict a conclusion about one or more of the other forces. On the other hand, when one of these contradictions cannot be resolved even after a thorough investigation and analysis, it reveals a critical issue for the firm or market in question, and this can be an opportunity – for the academic researcher, it is likely that the problem will be a solid new area for study, and for businesses, it is likely a problem whose solution will give them a strong competitive advantage.
If you need to analyze a scientific work in greater detail contact our writing department to avoid confusion and save your time.
Your control panel consists of two panes. Left pane is used to communicate with the writer directly. Enter your message in the text area and click "Send" button to send your message to the writer. For your protection, please avoid entering personal information, like phone numbers or email addresses.
Right pane has several boxes. In the Order Progress box you can see the status of the paper. The Assignment Criteria box is used to view your current assignment criteria or to upload additional instructions. Please note, that you cannot delete or change instructions. Please make sure you upload all instructions before the project is started.
The Additional Information box contains information about the writer. It also shows revision status, if revision is in progress.