Five Competitive Forces
(Porter)
Over a million managers and consultants are working together on management issues via 12manage each month...
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Five Competitive Forces
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Over a million managers and consultants are working together on management issues via 12manage each month... |
Outside-in Business Strategy. Explanation of Five Competitive Forces of Michael Porter. |
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| Jazmina L. Musa - Philippines | Bargaining Power of Buyers. Examples | "What precisely is bargaining power of buyers? Can you cite an example? Thank you." |
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| Mario A. G. Lopez - Philippines | Evolution in Our Expectations of Business and Porter's Model | "One item that does not easily float to consciousness is the evolution in our expectations of business and how we define responsible business business behaviour. The model as originally conceived was so focus on what were the most well accepted aspects of competitive life. It failed to take, at least up until that time, the still evolving conceptions of corporate responsibility (social and ecological)." |
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| Anil Kshatriya - India | Business Networking: Forces are Getting Connected | "I think, there is an interesting phenomena around us due to business networking. Can't we say that the basic model has now evolved into a more integrated one? I believe the 'forces' are now getting connected. For example, threat of new entrant and threat of a substitute consolidate in the case of "Chinese" product entering competition. Similarly other forces are forming permutations. I would like to hear from all on this..." |
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| Prasad SN - India | Substitution in the Five Forces Model | "I am interested in 'substitutes' such as: 1. New inventions - e.g. Mobile phones as communicators 2. New applications of existing products - e.g. Internet on mobile phones 3. New technologies to gainfully use existing materials more effectively -e.g. Nanotechnology 4. New discoveries about an existing product/material - e.g. Use of aspirin to treat heart ailments The list goes on. Is the impact of the likes of the above covered in Porter's framework? I think the threat from such forces which makes the product or service obsolescent / redundant is more important today as compared to all other forces put together, because the time frames for new inventions and discoveries to take place has come down. Can we call it an increase in the rate of evolution of the mankind?" |
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| Anthony Belon - Malaysia | Environmental Scan | "I would say that Porter’s “Five Competitive Forces” is a micro environmental scan of external factors in formulating competitive business strategy." |
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| Jane - US | Assumptions | "The Five Forces model has two basic premises. The first is that the goal of a business is long-term profitability. The second is that the intensity of competition in an industry is neither a matter of coincidence or bad luck. Competition is rooted in an industry's economic structure." |
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| Radhi - Zimbabwe | Porter's 5 Forces | "This article was well written. I find it helpful for my MBA studies and exams" |
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| Faraday - Netherlands | 5 Forces in the public sector | "The profitability (such as more students & diploma's) in the education sector is becoming increasingly a predicament for the public sector. It would be therefore a challenge to interpret and apply the 5 forces model for the public sector." |
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| Jay - US | Industry Analysis model | "Another name for the Five Forces model by Porter is: Industry Analysis model." |
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| Naveen Ahuja - India | Goverment Force in Porter's Five Forces | "Who can give an explanation of the government factor in Porter's Five Forces? What is it? Who introduced it?" |
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| Namathanga - Malawi | 5 Forces Mode | "I find it quite challenging but beneficial to apply the model to a public institution in my dissertation for Msc in Strategic Management" |
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| SanjaKHamilton - Canada | 5 forces and supplier marketing | "The 5 forces model doesn't take in to account supplier's marketing strategy especially investement in to advertizing and branding which can certainly sway supplier's power away and create a brand new environment. Otherwise it's a good model...." |
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| Kudzai Nyangoni - S. Africa | Porter's 5 Forces Model | "Michael Porter's 5 Forces Model is about the best model I know that provides a comprehensive basis for analysing elements that affect a business. If used carefully with other methodologies such as SWOT Analysis, PESTELG, BCG matrix, Core competency analysis, etc, one is able to craft a competitive and sustainable business strategy. Remember a good strategy is as good as the credibility of the information used and how well these methodologies are applied. " |
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| Richard - Ghana | Generic competitive forces | "Small businesses in Ghana are constantly battling these forces, yet most of their owners have little knowledge on how to deal with them. It would be great if we could explain these forces to some small business owners." |
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| Jan Demacker - Netherlands | It's a tool | "Ladies and gentlemen. IT IS A TOOL, nothing more. And just like ANY tool, it is as good or bad as the person using it.
The explanation above is alright. People do get the general idea of Porter's Model. (I needed to refresh as marketing isn't my thing and I do prefer this explanation over my university's)" |
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| robert - hong kong | 5 Forces Model | "Would be very useful to have a critical review of this model, as it has limits." |
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| Thabiso B Chele - South Africa | How does Information Technology alter Porter's 5 Forces | "How does Information Technology alter each of the five competitive forces in Porter's five forces model?" |
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| Jamal - Netherlands | Porter 5 Forces | "How can we amplify the model into a e-commerce business? Has anyone an idea??" |
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| Michel van Wijk - Netherlands | It's a practical tool | "I have experienced the 5 Forces Model of Porter as a good practical business tool. It provides good help to discuss both strategy and operational business issues. It provides i.e. good help to weight initiatives, projects for the next period in respect of the current prosition of a business. It is a good tool to make a company, a unit aware who it's competitors are, where threats are, and which opportunities are at stake. The 5 forces model has proven to be a practical business tool besides an academic tool." |
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| Andrew Whin - Zimbabwe | Porter's 5 Forces | "Competition exists in any industry and Porter's model should be applied in all industries to improve competitive edge and survive in the longrun." |
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| Jim - USA | Government contractors and Five Forces model | "I'm interested in learning how Porter's model could be applied to private government contractors like Haliburton, Blackwater, etc." |
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| Mrinal Ghosh - India | Calculating the Forces? | "Hi, can somebody help me how to calculate the co-efficients for each of the five forces. I understand all of the 5 forces might not be having the same weight. Also it would differ by industry." |
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| Wasike - Kenya | Other forces | "We also have other forces that operate together with Porters model. I.e. Government, Society and natural phenomena. These other three factors can be a threat or an opportunity to any business venture. Government with its legal policies, society with its demands and pressures on organizations, and natural disasters. Take an example of a slaughter house in dry areas where cows are dying out of draught, a textile company in Nakuru where cotton growing in Kenya collapsed because the government allowed the importation of second hand clothe, talk of a mining company that requires the residents to leave their land for another settlement and yet the residents are feel cheated out of the deal. Therefore, in industry competitiveness, Government, society and natural phenomena can not be ignored." |
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| Pakistan - Siddiqullah | Tools for Competitive Analysis of an Industry | "While using Porter 5 forces model remember not to ignore other models e.g PESTEL analysis, etc." |
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| Bhushan R. Singe - India | Porter's Five Forces Model | "In short it is an access to industry attractiveness and to gain competitive advantage. These forces influence strategy formulation and marketing opportunity decisions." |
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| └► Durgaaprosad (India) | Porters 5 Forces | "My personal view is not to struggle at the same place, rather in today's economy the best is to have a Blue Ocean Strategy. Of course the choice would depend on the SWOT/TOWS matrix." | |
| └► Pradip Kumar Sarkar (India) | Five Forces Theory of Porter - Substitutes | "Well, the Chinese (for that matter any country) entering into a market (read country) is not a substitute. A substitute is a product or sometimes product category that might be used as replacement for the product of the industry. For example, polycarbonate is a substitute for glass eyeglasses used in spectacles; nylon bags used in grains transportation are substitute of jute bags." | |
| └► John D. Ramos (USA) | Five Forces are Linked | "Corporate strategy may be developed and implemented in various ways within a regulated and competitive environment. There are linkages between competition, strategic action, and regulation in the global economy. With emerging markets slowly gaining traction the underpinning of each link is contingent on how one angles the analysis of Porter’s five forces." | |
| └► Granzotto (Italy) | Integration of Strategic Forces | "A real change is represented by networking. I agree with you regarding the interconnection of the forces in the system and appreciate every day this evolution of the economic and financial events because of all of this." | |
| └► Zanele (South Africa) | Five Forces Connectedness | "Barriers of entry in my view are insignificant as any potential investor's entry strategy is based on thoroughly researched market and environment scan therefore cost and capital become primary. Similarly new entrants may provide a substitute if faced with a highly rigid, regulated and insulated barrier and this then marries connectedness of entry to barriers to substitutes." | |
| └► Mario A. G. Lopez (Philippines) | Porter Model should Evolve for Current Turbulence | "From the very start most of us accepted the probability that the model, formed within specific contexts, would not be wholey applicable as conceived in many developing countries. Formed as it was in more stable times, the 5 forces model has yet to evolve for applications in more turbulent times." | |
| └► Mario A. G. Lopez (Philippines) | The Rubustness of the Porter Five Forces Model | "It is however a tribute to its robustness that people find Porter's 5 Forces useful as a starting model, regardless of the modifications they may find necessary. The key, as many have already written, is to make the modifications as justified or otherwise demanded by the specific set of conditions faced by the organization/company vis a vis specific markets and/or market segments." | |
| └► Anil Kshatriya (India) | @ Everybody | "Deal all, by use of the term Chinese I don't intend, nor am I attempting, to refer to a country specific strategy. Indeed my aim is to draw attention to "cost leadership" that these products manifest. Looking at the combination of forces I think there will emerge a Two-Dimensional 5 Forces Analysis." | |
| └► Anders Nystrom (Sweden) | More Integration in the Factors of the Model | "Everything is getting more integrated today. If you have a systemic view, individuals, groups and organisations are all systems, partly open, not open or not closed. It is the same regarding factors in a model. Mostly management theories are build on the opinion that systems are closed. If systems were closed they end up dead. If a system were open, it would be dissolved. Systems have always been partly open. But now the mutual boosting feedback between systems has become faster end stronger. Meanwhile the mutual weakening feedback has become less or was almost eliminated. In the global financial system this is obvious." | |
| └► Granzotto Aramis (Italy) | Interconnection and Flexbility | "All factors are connected to each other. In the financial systems this is obvious and you can see effects almost immediately. Unlike in other sectors where the counter reaction may show a time lag due to the rigidity of the system." | |
| └► Sara F (Italy) | Use Bidirectional Arrows in Porter's Five Forces | "I think that today this model can be used with a small but important modification: the arrows have to be TO the industry parties and FROM industry parties, as Brandeburger and Nalebuff argued. With bidirectional arrows we mean that five forces are not only a competitive threat but simultaneously collaboration opportunities. This is important to consider in a SWOT analysis." |
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| └► Anil Kshatriya (India) | @ Sara F | "This is an excellent thought. Bidirectional arrows is really true. All forces are now inter-linked as many players use advanced systems." | |
| └► Anders Nystrom (Sweden) | Cognitive Maps Needed to Deal with Mutual Responses | "Old theories split the world into clear causes and effects, today with mutual responses it is not possible to simplify the world any longer like that. In today's messy situation you need to use models which are a cognitive map. Porter´s five force is not a cognitive map. There are some existing systemic models. Marwin Weisboard, Jan A Johansson and me have created systemic models, which are more of cognitive maps." | |
| └► Ser Wah Oh (Singapore) | Porter's 5 Forces is a Static Model | "In fact Porter's 5 Forces is a static model. When you're looking at substitutes, new entrants, suppliers or buyers, you're looking at these forces in a static view. There are dynamic forces that cannot be represented by this model. And having a good framework to cover dynamic forces is difficult. So, we've to used our intelligence to gauge the dynamic parts such as looking at network and changes, e.g. competitors becoming partners, etc." |
| └► Jagdish B Acharya (India) | Inventions or Substitutes Make new Rules, They don't Follow old Rules | "When a substitute or invention comes, it changes the paradigm and new rules or models are born or searched. It is difficult to find models which may explain substitutes or inventions. But see: Disruptive Innovation. Simple substitute is increase in supply which may follow rules but real innovative substitutes cannot be explained, generally. Case to case treatment must be done based on nature of substitution." | |
| └► Satriyo Dharmanto (Indonesia) | Porter's Five Force and Substitutes | "It's a very useful tool that can be used to make significant analysis of our industry, in the combination with any other related tools. Regarding the threat of substitutes, I personally think that new technology development is a substitutes parameter that can be considered to provide answers, towards current turbulent economic condition" |
| └► Tom (US) | Assumption in Porter's 5 Forces | "Yet another major assumption of Porter's Five Forces Framework is that he views all industries as based on COMPETITION. However there are important exceptions on this view, such as for example in the automotive industry, where strong COLLABORATION between assemblers and their suppliers have turned out to be very beneficial for all parties. The same may be the case for knowledge-intensive industries, since knowledge sharing increases its overall value. Furthermore, Edward Freeman argues that the economic paradigm of competition should be replaced by the more sustainable paradigm of collaboration with stakeholders." | |
| └► Danny (UK) | Assumption: Product Markets... | "There is yet another important assumption in the Porter Model: that firms are competing only in PRODUCT OR SERVICES MARKETS (where firms compete for customers). However firms are actually competing in two markets. The other one being: FACTOR MARKETS(where firms compete for resources). These resources can include a variety of tangible and intangible assets, and even stakeholders such as shareholders-investors, banks-creditors, employees-talent, managers, the media,etc. Often this competition for stakeholders is cross-industry!" |
| └► Mitesh (Australia) | Porter's five forces analysis | "Its a good article for those who want guidance on how to conduct industry analysis for an organisation or for any academc purpose." |
| └► Patricia (UK) | Five Forces for Local Authorities | "Has anyone tried to use the tool applied to a local authority? If yes - was it useful?" |
| └► jihan (Dubai) | HR | "could i have this copy" |
| └► Abdur Rob (Bangladesh) | Example Goverment Force in Five Forces | "I can't tell you who introduced this 6th Force, but the example below can justify the reason. Nowadays, many Governments have established regularity bodies. As an example, in Bangladesh, Bangladesh Telecom Regularity Commission (BTRC) fixed the price ceiling (BTD 0.25 - BDT 2.00) for cellular phone. This is one of the forces for the cellular operators to maintain this price range." |
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| └► Alchui (Singapore) | Government and 5 Forces | "The Government plays the role of "Caregiver/Policeman" who regulates the economy [See Porter's Diamond of National Advantage]. Government "provides" the land space for development, upgrading and funding schools and skills, size of population and labour force, attract foreign investors, encourage entrepreunership, regulates the imports and exports, regulates the industries and its business policies, etc. The Government will "nurture" the growing industries, thus some firms/industries benefit from this force more than the others." | |
| └► Dr. Uditha Liyanage (Sri Lanka) | FiveForces | "Government, the proposed sixth factor may well impact all five factors. Moreover, the 5 forces have to be placed within a context or framework, a key element of which is the Government." | |
| └► Anders Nystrom (Sweden) | The 6th force | "I have a background in systemical thinking, the theories of sociotechnical systems. Generally to handle forces you have to define borders of different levels of systems as a first step. Porter´s model is defined as the market and this 6th force is just one of several forces on the level above the market, e.g. nations or EU. Another force on the level above is institutional conmpetition, there are more (is another story). The forces on the level above effect the whole market system at the same time and in similar ways." | |
| └► K. Gopalakrishnan (India) | Govt. as the 6th Force | "I had modified the Five Forces of Porter with Government as the 6th Force for my pharmaceutical management students in ies college, bandra, mumbai long back. In pharma business this is very relevant and this was well accepted by pharma professionals who came to know about this modification of the 5 forces." | |
| └► Stefan Guenther (Germany) | Government as the 6th Force | "I work in the financial industry and particularly in my field the existence and activity or non-activity of whatever regulatory body is quite visible right now and will no doubt play a more important role in the future, thus defining the playing field and the rules for actors. In the investment industry I regard this 6th force as one of the most important ones, more than new market entrants in this market under pressure." | |
| └► David Paul (India) | Re: Government sixth factor? | "If you give a chance of reading the Book 'Only the Paranoid Survive' by Andy Grove, he explains the role of the government as a sixth force. The HBR article of January 2008 by Porter, disagreed with all the views and in toto of the whole process, he says that the government is not a force which enduces us to understand the industry profitability but, an important factor. Remember he says that the factors are nothing but complementors as proposed by Grove and disagreed by Porter.... Porter in his competitive advantage of Nations gives a much better outlook to the role of the government in this regard, Thanks and regards." | |
| └► Deb M (Singapore) | Role of Government | "Government Forces can either be categorized as a Business Entity like in a state control enterprise or as a Barrier. In most countries given its executive & legislative power Government acts as a barrier (read: regulator)." | |
| └► Jeswan Singhps (Malaysia) | Free Market or Controlled Economy | "Porters model works well or is more suited to a free market economy where the main determinants are the forces of supply and demand. In a controlled economy where there is government intervention to meet certain social objectives, then the business rationale is different and often results are achieved at a much higher cost." | |
| └► Gianvittorio (Netherlands) | Government in Five Forces | "Hi, if you believe Mr. Porter then government is not one of the forces. See this video, in which he talks about why government should not be considered one of the forces." |
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| └► Jagdish B Acharya (India) | Let Government Be Out of the 5 Forces Model | "Governmental controls normally affect all forces and can be treated by their effect separately. These forces work with very complex motives which are different from business management and hence difficult to be modelled. Governments are painted badly most often but they do have some stabilizing influence and often represent consumer's voice." |
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| └► Mario A. G. Lopez (Philippines) | Early Enrichments of the Original Model by Austern | "Sometime in the late '80s, Porter's Harvard colleague Jim Austem located the five forces model within the context of developing countries where government plays a more marked role - not always bad - in nurturing and fostering growth of enterprises and industries to improve national economies. Worthwhile going back to look at that enlarged model." |
| └► rajesh (india) | research | "it was very informative" | |
| └► Reza (Iran) | 5 Forces Questionnaire | "Who can provide a questionnaire that helps to assess the competitive forces using the Porter model?" |
| └► Ilya (Russia) | economy theory | "!" |
| └► Shiaka (Sierra Leone) | 5 Forces Model | "These forces have an application to industry but I'm not sure if they can really be applied to small businesses in our region, which share the same characteristics." | |
| └► Joseph Munyao (Kenya) | 5 Forces Model | "Quite a well thought through model, but may need to be adjusted to have meaning to small scale businesses. Especialy in the informal sectors of developing countries like in Central and Eastern Africa." | |
| └► Gervis Ochoa (Venezuela) | Competitive Forces | "This is a great tool for Projects and Strategic Management Decision Making approaches. It helps to do companies valuation and also helps to buid a solid strategy when companies face the sharp force of competition and rivalry. I used this piece of information to finish a project for one of my exit courses at USF in Tampa Florida. Great Help. Well outlined." |
| └► abhishek rautela (UK) | Only Porter's 5 forces is not enough | "I would like to disagree on excessive dependence on Porter's 5 forces for formulating any strategy. I agree with Jan, and would like to add on that this TOOL must be used only to get a better picture and NOT to conclude any strategy. It gives you a good idea but of very basic nature. Any business, no matter what its nature is, is exposed to these basic forces and this tool only helps is to recognize them. You might want to include other tools (Margaret Peteraf’s model) and other tools and theories to see a better picture. In such a dynamic and uncertain world, no one tool or theory will be sufficient. So, I would rather advice a cocktail than a straight-up." | |
| └► Siddharth P (UK) | Its a Tool.. Which If Applied in the Right Way Can Provide Signigicant Insights | "Any business revolves around these forces.... Whether it be a big daddy or a micky mouse organization.. What matters for profesionals using this tool is the application of the tool coupled with other strategic management tools like PESTLE, TOWS, VRIO .. and many more :-)" | |
| └► Stephen Makate Maleka (South Africa) | Porter’s Model is not All to Consider | "A decision to develop a new market is reached after thorough research using Porter's Five Competitive Forces Model. But if the research is fundamentally flawed, the model will not be accurate. I have learned, after very expensive errors, that tools are but tools and the application/understanding is vital. New market development requires full understanding of the Porter's model, PESTEL, IRR/NPV analysis, performance measurement and some level of risk management. While theory is important, the reality may be different. And Porter’s model is not all to consider." |
| └► Emmanuel Duru (Nigeria) | How does Information Technology alter Porter's 5 Forces | "It may affect Porter's 5 Forces but not totally, considering that there are inherent factors which cannot be manipulated digitally. Any outcome will be an assumption; which may not be absolute. So, it takes a lot of understanding of the environment for which the 5 forces model is applied." | |
| └► Hemant Johri (India) | The dynamics of the forces may be changed | "The 5 competitive fundamental forces do not change with IT. They remain the same. However: IT may change the dynamics of these forces. What IT does is listed below: 1. It can make information available at higher speed. 2. As a tool it provides speed and accuracy in preparation, processing and analysis of available data. 3. When applied in an industry it can lead to transformation or innovation of processes. This may provide competitive advantage to the firm either in terms of cost reduction or by disruptive innovation." |
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| └► Jimish Shah (India) | 4 ways in which IT alters Porter's 5 Forces | "1. IT may increase the buyers bargaining power as information of substitutes and prices are easily available. 2. IT can help bring suppliers and the firm together and work in collaborative mode. This will be an added advantage for the firm over its rivals. 3. Software packages like CRM, SRM, PLM can improve the competitive position of the firm and increase collaboration between all the entities in the Supply Chain. 4. IT can be used to improve processes and efficiency. This can help the firm to be cost effective and technologically advanced. This will increase the barriers for entry for new entrants." |
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| └► carlos medina turon (Mexico) | Add Stakeholders Concept | "I recommend to review the concept "STAKEHOLDERS" besides the 5 Forces once you have to ask for opportunities and forces, regarding Labor Markets, Communities, Universities that feed professionals, Media, Banking and Insurance Companies, Environmental Agencies, Non Govt. Organizations, Tax Agencies, all Stakeholders providing opportunities and forces as long as they are related to the company of course." | |
| └► MENSUR (Albania) | The validy of Information Technology | "I think that IT can influence all of the five forces but we must be careful about information how sure it is. Also: is the technology good enough like it is? And: can it help me to do something in my business? And: how much will be the costs to my budget to use this technology... And: some technologies have a life time and have to be substituted or changed..." | |
| └► Muder Chiba (India) | Information Arbitrage | "Essentially, the same points that the other are making... It would affect decision-making using the model insofar that the better users of IT would be able to gain superior leverage. This leverage would come about through faster information flows, enhanced data interconnections / trend spotting and superior information sharing for decision-making." | |
| └► Kwame Yeboah (Ghana) | IT does alter Porter's 5 Forces | "Which ever way one looks at it, IT DOES alter the 5 forces (compared to the traditional forms in which it does). THREAT OF NEW ENTRANTS: Since the power of the internet has made the world a global village, it is easier for our Chinese brothers (for example) to reach people in Ghana with textile products for instance, hence competing with the industry here in Ghana. THREAT OF SUBSTITUTES: India is offering a substitute to the expensive American data entry clerk's services by working online at a much cheaper cost to the American employer (via the internet) BARGAINING POWER OF SUPPLIERS: There are many more suppliers now than those from ones immediate locality or country so suppliers aren't that powerful any longer. INTENSITY OF RIVALRY: There is surely more rivalry now. Zenith bank is now in Ghana (along side several other Nigerian banks) and they don't only reach me through the local media but also through CNN! The local banks have no choice but to sit up!" |
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| └► John D. Ramos (USA) | The Porter Model and IT Strategy | "The Porter forces are inherent in the 21st century - it's no longer enough to attempt to align information technology strategy with the strategy of the business enterprise; such alignment is integral, but with globalization the world has changed to the point that information strategy needs to be a part of business enterprise strategy from the beginning, not a "me too" follower. Utilizing the forces in unison with business logic can enable several strategic advantages – such as, improving operating efficiency by leveraging technology apparatus for automation of payroll, order entry, jit, etc. The key is execution." |
| └► Editor (Netherlands) | 5 Forces and Internet | "12manage Premium is having a comprehensive expert tip about this complex issue." |
| └► Molepo (South Africa) | What are the other Forces? | "I just wanna know what are the other forces except the ones that are indicated above on this page. This is very interesting, i think there can be more of this. Is there any?" |
| └► Agustin (Argentina) | Calculating the Forces | "In order for this analysis tool to be effective, you may want to consider a few aspects: A) In order to solve any optimization problem you need to apply the right formula m(x;y;z;... n) B) This method stands for a non-numeric type of analysis. It is very hard to determine, whether a co-efficient would be effective or not. Yet, a few of them may be calculated. I'm not quite certain about them, but for example: Competitors: it would be interesting to know how many competitors exist in the whole market. By knowing this amount, you may decide which style of scale economy you need. If there are only 2 rivals in the same market, you may choose a Stackelberg model, by simply defining your price as a leader, hence: P = a - b [q1+r2(q1)]; where r2 stands for the reaction." |
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| └► Anil Kshatriya (India) | Calculating Porter's 5 Forces | "Porter's five force model is more of a tool to understand factors that affect competition. It is ordinal and not cardinal in nature. In its true spirit, we must look at it as a map and not as actual territory. We may use it for direction but must avoid trapping our judgements only based on exhibits used therein." | |
| └► Mrinal Ghosh (India) | @ Anil Kshatriya | "Hi Anil, why do you feel that they are ordinal in nature and not cardinal. I see a similarity between these and the GE Matrix. If we can have coefficients for the GE matrix, then why cant we calculate Porter's Forces?" | |
| └► Anil Kshatriya (India) | @Mrinal | "Why not. It can be extended to logic of the GE Matrix. I only have one apprehension that we might get caught in the loop of proving dominant strategies for the game. This takes us away from the big picture." | |
| └► Mrinal Ghosh (India) | Sub Parameters | "With due regards, though it is a mixed game, I guess the coefficients can be calculated by considering some of the main forces and their sub parameters. For example, in case of competitive intensity it can be measured by checking the number of competitors in the market and their approach to the game you play (though it comes later, only after you have entered the market). Personally I feel we can project the measured values by segmenting the market in two types - developed and emerging. The market dynamics will remain the same across the segments and the manner these forces would react would be same across developed markets and so in case of emerging markets." |
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| └► Jagdish B Acharya (India) | Hurdles Too Strong to Calculate | "Though we like the idea of calculation, everything cannot be calculated, because: 1. The company is in a dynamic situation and no static factors can be applied. 2. The influencer of factors also gets influenced by factor. This is like "snakes eating each other" paradox. 3. The pace of change often is higher than the rate at which factors could be calculated or estimated. 4. No competitive advantage is static and when an advantage is seen, players act to use it and that neutralizes it. 5. Often players with "gut" sense rather than analytical strength play and that upsets the predictably of the factors. Because of the interdependence of forces and objects, any conclusions or use for tactics is risky. One may however take help of evaluation of forces and determine strategy to derive advantage from this knowledge. Calculating and taking help for tactical decisions in my view is dangerous and should be avoided." |
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| └► Agustin Cosso Leskovar (Argentina) | Sub Parameters | "Mrinal, I have made some research in my math books here at home. I think there is a way to determine the future impact of a chain of events by considering only its recent ones. It's a stochastic process. You may want to apply the Markov Process or the Garman-Kohlhagen Formula. And if you are determined and have enough data you can even split the market segments into developed and emerging as you stated." |
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| └► Mrinal Ghosh (India) | Historical Data | "Yes, also we can have a look at the historical data to analyse how the markets have behaved in these situation. For example if we take the US automotive market in very early 1900s or the tire industry (when they were at growth stage) and understand how the forces behave in these economic conditions then we can actually extrapolate that to current emerging markets. However we need a lot of empirical data." | |
| └► H D Sharma (India) | Calculating the Magnitude of the Five Forces Quasi Quantitively | "Hi the group! The idea is fascinating but we must remember that the numbers so estimated or generated would at best be soft numbers to be interpreted only quasi quantitatively. These estimates can only be amenable to rank statistics and analysed through loglinear or logit analysis. Having said that I would like to mention that loglinear and logit analysis are only qualitatively interpreted." | |
| └► Agustin Cosso Leskovar (Argentina) | Garman-Kohlgane | "HD Sharma, with the GK formula you shouldn't have to do any qualitatively interpretation, you just have to adjust the variables to fit the information required, always considering there are two type of variables: static and floating. However it is true, you may need huge algorithms, and therefore, a lot of information, which will not be easy acquirable. If I have some free time today, I'll try to adjust the formula to measure market changes and flows." |
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| └► Umesh (Ooman) | Many Variables | "When variables are many, analysis becomes complicated, even when data is available. So 5 force analysis is a tool which can give you some idea about the conditions in which a business is." | |
| └► Hans Jørgen Pedersen (Denmark) | The Model is Non-numerical in Nature | "Until I come across a very advanced micro econometric model (i.e. a book on the subject), I take the view that Porters five forces is more a mind map for strategic consideration than a numerical tool. To assign parameters based on available data and mechanically go with the computed result is a very dangerous business. Common sense goes a long way on its own; but a computer program capable of interpreting industry data according with the P5F Model is a very ambitious goal in my opinion. It involves stochastic programming on a level beyond my imagination, as the world is changing way too rapidly for historical data to be of any benefit." |
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| └► Jose Delgado (Mexico) | Five Fources Measures | "In my personal point of view, I think it should be fantastic to use algorithms and formulas to predict business but nowadays it is very difficult and definitively is not a good idea to do that when markets are very unstable and in fact maybe the best option to understand is to use the theory of chaos. Finally if you want to give some importance to one or two of the five forces, then maybe should be better if you determine a percentage of importance, which can depend on the specific situation of your business." |
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| └► Parvez (Mauritius) | Calulating Forces by Social Engineering | "I believe these statistical tools are important but we should favor social engineering also (finding information about the reality or trends via social networks, web sites or media). This allows us to get a clear picture of the reality and confirm our decisions based on stats." |
| └► Maria Mosha-Mtenga (Tanzania / South Afric) | Additional Factors in Porter's Five Forces | "Remember that all these models (porter's models; pestel etc) are academic and are purely a guideline for the business world to interpret/use in their practical world. There are other factors that should be taken into account (government, society pressure... etc) and you will find that all of these factors are integrated." |
What
is the Five Forces model of Porter? Description
