Porter's Five Forces Model
The Five Forces Model of Porter
The Five Forces Model (P5F) and the framework behind it dates back to the early 80s and was the work of Michael Porter, a scholar working and teaching at the Harvard Business School.
This model (see figure 1), as declared by its creator, was able, at that time, to fill a void, in the management field corresponding to the development of a new discipline, Competitive Strategy. It came at a time when down-sizing, re-engineering etc. were elements of strategic choice. The intent of Porter was to provide an overall model that would help enterprises realize the impact of external scenarios (that he calls forces) on their overall performance.
One fatal attraction of the P5F model was that it finally allowed companies to assess simultaneously the industry in which it was competing thus indirectly understanding its competitors, and subsequently decide and implement a competitive strategy. It also coincided with a marked acceleration of competition in the USA. It was, and still is considered to be a unique, simple, easy-to-understand, intuitive, structured framework for company strategy. The P5F model also helps develop a competitive company position along side adequate strategies to create value and therefore outperform its rivals: in essence it provides the helicopter view of the industry environment in which the company operates and competes. The five forces of the Porter model are summarized as follows:
Threat of new entrants: this is the easiness with which a new company could enter the industry thus impacting the profitability of the industry and the competitive position of the enterprise. This force should qualitatively and, ideally, quantatively measure the status of Barriers of Entry especially those factors that make it costly for companies to enter the industry (Hill et al. 2001). Examples of significant entrance barriers (Bain, 1956 cited by
Hill et al. 2001) are: Brand Loyalty (Clifton et al., p.95,
The Five Forces Model (P5F) and the framework behind it dates back to the early 80s and was the work of Michael Porter, a scholar working and teaching at the Harvard Business School.
This model (see figure 1), as declared by its creator, was able, at that time, to fill a void, in the management field corresponding to the development of a new discipline, Competitive Strategy. It came at a time when down-sizing, re-engineering etc. were elements of strategic choice. The intent of Porter was to provide an overall model that would help enterprises realize the impact of external scenarios (that he calls forces) on their overall performance.
One fatal attraction of the P5F model was that it finally allowed companies to assess simultaneously the industry in which it was competing thus indirectly understanding its competitors, and subsequently decide and implement a competitive strategy. It also coincided with a marked acceleration of competition in the USA. It was, and still is considered to be a unique, simple, easy-to-understand, intuitive, structured framework for company strategy. The P5F model also helps develop a competitive company position along side adequate strategies to create value and therefore outperform its rivals: in essence it provides the helicopter view of the industry environment in which the company operates and competes. The five forces of the Porter model are summarized as follows:
Threat of new entrants: this is the easiness with which a new company could enter the industry thus impacting the profitability of the industry and the competitive position of the enterprise. This force should qualitatively and, ideally, quantatively measure the status of Barriers of Entry especially those factors that make it costly for companies to enter the industry (Hill et al. 2001). Examples of significant entrance barriers (Bain, 1956 cited by
Hill et al. 2001) are: Brand Loyalty (Clifton et al., p.95,