Porter's Five Forces

Porter’s Five Forces

Jessica M. Monroe

AMU

Abstract

This paper takes a brief look at Porter’s Five Forces model, describing what each of the forces entail including some generic examples of those forces. I will go a little into how each of the forces impact each other, specifically how they each relate to the force of rivalry. I will take a quick view into how the five forces play a part in the global market, particularly with respect to competition for the same market. Finally, I will look at a few of the disadvantages of Porter’s model, and a potential solution using a new, slightly differing model.

Porter’s Five Force

Michael Porter created the Five Forces model to describe a given firm’s operations in its industry context. Porter’s forces were created to respond to SWOT analysis, which is a method that evaluates Strengths, Weaknesses, Opportunities, and Threats. Porter felt that this model was based on “the idea that the relevant considerations are company specific” (Porter, 2002). He follows this statement by describing his reasons to create his model: to create an all-encompassing technique to analyze an industry, done from the point of view of an incumbent. His model outlines the five primary considerations to be taken into effect during analyses, four of which could almost be interpretations of the fifth, but are in fact separate entities unto themselves. The centric consideration is that of Rivalry. Because competition is not perfect, firms will attempt to achieve an advantage over their rivals by using one or more of several competitive moves, to include price changes, improvement of product, or exploitation of supplier relationships.

Rivalry is influenced by any number of factors in which the end result is essentially the same: to cause a firm to fight harder to achieve or maintain its position in the industry in which it associated. Such factors could include a large number of firms, larger than the customer base that is being...