Five Force model of Michael Porter is a very well-known for evaluating company’s competitive position. Michael Porter provided a framework that models an industry and therefore implicitly also businesses as being influenced by five forces. Michael Porter’s Five Force model is often used in strategic planning.
Porter’s competitive five forces model is probably one of the most well-known used business strategic positioning tools and has proven its usefulness in numerous situations. When exploring strategic management models, you also might want to check out the SWOT analysis .
+Why would you need to use Five Force model?
In general, any Manager or a strategic business manager is trying to direct his or her business in a direction where the business will develop an edge over rival firms.
Michael Porter’s model of Five Forces can be used to better understand the industry context in which the firm operates. Porter’s Five Force model is a strategy tool that is used to analyze attractiveness of an industry structure.
+What is good about Porter’s Five Forces model?
Prof. Porter has the ability to rewrite complex concepts in relatively easily accessible formats that everyone can understand.
His book about the Five Force model is written in a very easy and understandable language.
Even though his model is backed up by some complex model, the five force model itself is simple and easily comprehensible at all levels.
Porter’s Five Forces model provides suggested points under each main heading, by which you can develop a broad and sophisticated analysis of competitive position.
This can be then used when creating strategy, plans, or making investment decisions about your business or organization.
+Does Porter’s Five Force model really work?
Theoreticians have different view on this. While some agree that Porter’s Five Forces model is the ultimate explanation of how world works, others disagree.
It depends in what time frame we judge the state of the facts. Even Michael Porter himself acknowledges that time is of essence when it comes to how his forces interact with each other.
Numerous economic studies have shown that different industries can sustain different levels of profitability. This can be attributed to differences in industry structures.