Five Competitive Forces That Shape Strategy

¶ … Competitive Forces That Shape Strategy Accurate comprehension of the article = blue Critical analysis of the strengths and weakness of the ideas, concepts or theories = yellow * Provision of specific comments in the form of criticism, disagreement, synthesis, paradox, curiosity or genuine confusion= green Assessment of Five Competitive Forces That Shape Strategy In the article The Five Competitive Forces that Shape Strategy (Porter, 2008) the well-known framework of the Five Forces Model originally defined by Dr.

Michael Porter in 1979 is updated to reflect the current realities and uncertainties of industries included in his original article and book that expanded on the model's core concepts (Porter, 2008). The value of the Five Forces Model has been questioned over the last two decades, and several of the most valid criticisms of the framework are analyzed and responded to by Dr. Porter in this article.

He also brings in an analysis of Return on Invested Capital (ROIC), in insightful analysis of how the Five Forces Model can be an accurate predictor of long-term profitability and performance of an enterprise in a given industry. There are still shortcomings with the model as it doesn't reflect the chaotic and fluid nature of business models today; however it does serve as a highly effective platform for analyzing enterprises and industries.

Analysis of the Five Forces Model The original Five Forces Model seeks to provide insights into how rivalry across competitors is explained and accelerated using the four dimensions of threat of new entrants, bargaining power of buyers, threat of substitute products and services, and bargaining power of suppliers. These four factors are continually in motion within industries, with each having a very specific series of dynamics and frameworks associated with them. Dr.

Porter contends that the internal dynamics and factors inherent in each of these forces will drastically reshape industries and serve as a barometer of future ROIC levels based on current performance (Porter, 2008). His assessment of each of the forces also assumes a level of inherent or innate competition in the core areas of the bargaining power of suppliers and bargaining power of buyers, each working in unison with each other to serve as equilibrium throughout an enterprise and industry.

The core assumptions of each of these five forces are also focused on quantifying the long-term effects of each subsystems that either contribute or detract from profitability. The model is designed to capture the impact of innovation- and price-based competition longitudinally within an industry as well, as the ROIC analysis provides quantification of (Porter, 2008). Lastly, Dr. Porter provides a framework for completing market analyses using his framework as well, which is complete given his foundational framework now two decades old.

Conclusion The Five Forces Model continues to serve a useful purpose in explaining.