Porter's Five-force Model and it's continued validity as a strategic management tool
Porter's Five-force model is a theoretical guide to understanding the pressures that are felt by an industry, and by analogy, on a company. It can be used in such a way as to allow “the strategic business manager seeking to develop an edge over rival firms … to better understand the industry context in which the firm operates” (Porter, 1999). The key to any successful (e.g. profitable) business venture is an understanding of the differentiating factors that contribute to a higher-profit, lower-cost operation. Porter's model, while helpful, is not flawless, and is not able to escape the need for modern interpretation. However, with inclusion of modern factors Porter's is still a viable tool for the business strategist of today.
Originally part of Porter's 1980 book “Competitive Strategy: Techniques for Analyzing Industries and Competitors” (Industry Handbook, 2011), the five-force model is a method of analysis of a business position that allows an understanding of “where power lies in a business situation” (Porter's Five Forces, 2011). If a manager of an organization can understand this about his/her business, he/she can focus effort on areas of competition that are weak and can also better anticipate the structures needed to incorporate a new change. “With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps” (Porter's Five Forces, 2011). The model can be applied to current business operations and industry understanding in order to give a strategic business manager an overview of the organization in a way that enables the him/her to make decisions that will maintain profit levels and competitive position.
Porter's model states that part of the phenomenon that “numerous economic studies have affirmed that different industries can sustain different levels of...
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