Michael Porter's Five Forces

Extract

[...] Limitations However, there are some challenges with the Five Powers force. Critics generally argue against it because it emphasizes more on the micro level of the industry and represents it as the factor that is solely responsible for producing the required sustainable competitiveness. Moreover, the model builds on the assumption of a stable industry environment, toward which the actual situation in business can be rather different, as the conditions in specific industries oftentimes are both volatile and influenced by either new technologies or changes in regulations (Rajasekar, 2021). [...]

[...] Buyers' power in a market is affected by the concentration of buyers, the number of alternative products/services, the cost of switching suppliers, and by the knowledge of the product/service they are buying. The seller's position becomes weaker when there are few buyers or the goods are not differentiated. Buyers can now be more powerful by negotiating. Another causing factor for buyer's power is those who engage in purchasing the industry's product or service that is not a big chunk of their aggregate costs and the ones who are supplier wise knowledgeable (Rajasekar, 2021). [...]

[...] Advantages and Applications The primary advantage of Porter's Five Forces Model is its low complexity and multifunctionality. The model as a tool comes with a pronounce outline on how it can be applicable to different industries (manufacturing, transport, and services) and at the same time it provides solution on all geographical regions. It encompasses a broad view of the market terrain, grasping market patterns and impending competition in the process, which not only puts companies on alert but also allows them to be proactive. [...]

[...] https://www.upet.ro/annals/economics/pdf/2021/18).%20Ghicajanu_2.pdf Goyal, A. (2020, March 9). A Critical Analysis of Porter's 5 Forces Model of Competitive Advantage. Papers.ssrn.com. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3765758 Rajasekar, J. (2021). Porter's 5 Forces - A strategic planning model - apppm. Doing-Projects.org. [...]

[...] The presence of close substitutes may restrict an industry's potential for growth and productivity by setting a price ceiling and imposing requirements (Goyal, 2020). The cost of switching to substitutes, the buyer's affinity for substitutes, and the relative price and performance of alternatives are some of the variables that affect the threat of substitutes. The threat is increased in the unlikely event that alternatives are quickly available, priced competitively, and provide comparable or better performance. To maintain customer loyalty and reduce risk, it is imperative for industry participants to monitor and respond to the emergence of underutilized alternatives by improving item quality, adding features, or differentiating their products (Goyal, 2020). [...]