The Five Competitive Forces

2244 Words9 Pages
The Five Competitive Forces Michael Porter, a young economist and associate professor, helped to shape the ongoing academic research and influenced the way corporations implement management strategies, through his publications of the Five competitive Forces. The theory overcomes the notion of competition being narrow, and highlights the existence of a broad competitor base for managers. The five competitive forces that determine industries competiveness are threat of new entrants, threat of substitute products, bargaining power of buyers, bargaining power of suppliers and competitive rivalry (Appendix 1).Further, the concepts’ focus of an underlying fundamental, allows the application of the model to a wide range of industries within various economies, indicating the robustness and flexibility of the framework. However, recent research may indicate that it may be less useful than it was envisaged. Purpose and Usefulness of Five Competitive Forces model Due to the lack of consensus built around strategic management practice, Porters’ (2008) primary objective of the five forces model was to inform managers of effective strategies that could raise the profitability within the industry they operate within. In order to do this, the model focuses one single objective of the business, which is to identify the industry which provides a superior economic performance. Superior performance can be attained by a business exploiting its special resources and capabilities in order to sustain competitive advantage. Porter believes the model allows managers to identify the firm’s strengths and weaknesses, as the model portrays involvement of the whole supply chain and the interdependence within each player. In turn allows firms to take offensive and defensive actions to withstand pressure from the five forces exerted on them. Thereby, the model has the ability to provide a
Open Document