Beyond Porter Five Forces
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Beyond Porter – A Critique of the Critique of Porter
The writings of the American managementguru and Harvard-Professor Michael E-Porter are considered to be among the most influential of their subject – and among the most critiqued ones. Porter had a lasting influence on strategic management with his books about competitive advantages on industry level and on global level, which were written in the eighties. Porter’s models like the Five Competitive Forces, the Value Chain or Porters Diamond have become standard equipment of the manager’s toolbox. Porter’s ideas became more and more subject of critique under the impression of the developing Internet economy during the last decade. Critics point out that economic conditions have changed fundamentally since that time. The rise of the Internet and of various e-business applications has strongly influenced nearly all industries. In fact, Porters theories base on the economic situation in the eighties. This period was characterized by strong competition, cyclical developments and relatively stable market structures. Porter’s models focus on the analysis of the actual situation (customers, suppliers, competitors etc) and on predictable developments (new entrants, substitutes etc). Competitive advantages develop from strengthening the own position within this FiveForces-Framework. Hence, these models cannot explain or analyze today’s dynamic changes that have the power to transform whole industries. tools: digitalization, globalization, and deregulation. Digitalization: As power of information technology grows, all players in a market will have access to far more information. Thus, totally new business models will emerge in which even players from outside the industry are able to vastly change the basis of competition in a market. Downes gives the example of the rise of electronic shopping malls, operated for instance by telecom operators or credit card organizations. Those who use the Five Forces Model and who
Beyond Porter – A Critique of the Critique of Porter
The writings of the American managementguru and Harvard-Professor Michael E-Porter are considered to be among the most influential of their subject – and among the most critiqued ones. Porter had a lasting influence on strategic management with his books about competitive advantages on industry level and on global level, which were written in the eighties. Porter’s models like the Five Competitive Forces, the Value Chain or Porters Diamond have become standard equipment of the manager’s toolbox. Porter’s ideas became more and more subject of critique under the impression of the developing Internet economy during the last decade. Critics point out that economic conditions have changed fundamentally since that time. The rise of the Internet and of various e-business applications has strongly influenced nearly all industries. In fact, Porters theories base on the economic situation in the eighties. This period was characterized by strong competition, cyclical developments and relatively stable market structures. Porter’s models focus on the analysis of the actual situation (customers, suppliers, competitors etc) and on predictable developments (new entrants, substitutes etc). Competitive advantages develop from strengthening the own position within this FiveForces-Framework. Hence, these models cannot explain or analyze today’s dynamic changes that have the power to transform whole industries. tools: digitalization, globalization, and deregulation. Digitalization: As power of information technology grows, all players in a market will have access to far more information. Thus, totally new business models will emerge in which even players from outside the industry are able to vastly change the basis of competition in a market. Downes gives the example of the rise of electronic shopping malls, operated for instance by telecom operators or credit card organizations. Those who use the Five Forces Model and who