Michael Porter created the “five forces model” to assist businesses in analyzing the level of competition present in a given market and formulating effective tactics to compete. Using the framework, a firm can pinpoint and examine the driving factors that impact prices and profits. Although this model is generic and can be adapted to any sector, it will be most useful if applied in a particular setting relevant to the evaluated business.
Using Porter’s five forces paradigm for managing change is questionable since it was not designed to do so. There is a subtle message in the concept that compels businesses to look for a fresh strategic vision, which allows them to address several significant strategic and competitive concerns (Bruijl & Gerard, 2018). Such as (a) how can businesses choose the best place to operate within a market to maximize profits? (b) what product or service is driving most of the industry’s profits? (c) Which major changes will likely alter the competitive landscape in a particular market? Moreover, (d) when regulations are eased, what does it reveal about the market situation? These questions are essential for top managers to answer because the answers will shed light on how the various forces within each of the five categories influence the industry’s profit levels (Bruijl & Gerard, 2018). Stronger forces are less profitable, whereas lesser forces are more profitable.
More importantly, Porter stressed the need to use this paradigm at the entry level of industries. A company with a presence in more than one industry must create a unique five-forces analysis for each market in which it competes. Thus, the model will be most beneficial when utilized in a specific context appropriate to a firm’s operations.
Reference
Bruijl, D., & Gerard, H. T. (2018). The relevance of Porter’s five forces in today’s innovative and changing business environment. Available at SSRN 3192207. Web.