Porter's Five Forces and How They Aid Strategic Planning

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How does Porter’s Five Forces Model assist an organisation in their strategic planning? Since the inception of strategic planning in the mid 1960’s corporate leaders have embraced it as a "the one best way" to devise and implement strategies that enhance the competitiveness of each business unit (Mintzberg, 1994). However there is a crucial difference between strategic thinking and strategic planning. Strategic thinking is the conceptualisation of a firm’s future direction, where there is scope for thought, creativity and action. Strategic planning on the other hand is the programming and operationalisation of organisation’s future direction requiring thought, analysis then action (O’Shannassy, 2011). Both strategic planning and thinking form part of the larger strategic management process and both are crucial to an organisation’s success. In order to survive and even prosper in a competitive industry, organisations must be able to use these strategies as a means to achieve some sort of competitive advantage within their relative industry. They must monitor both intra-organisational factors as well as external factors from the industry so that they can create a “unique and valuable” position (Porter, 2003) within their competitive landscape. Porter’s Five Forces gives insight into the external factors which shape industry. These Forces will be highlighted and their efficacy in strategic planning will be assessed. This essay puts forward the notion that performance is driven by industry and firm-specific factors (Brahma, 2011) and an awareness of both is integral for strategic planning. It is suggested that a broader ‘pan-theoretical approach’ (Fuller, 2010) be taken to ensure that strategy is devised not solely on industry analysis but by an organisation’s resources (Resource Based View) and internal structure as well. This essay will analyse each of the external

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