Content area
Full Text
In 1980, Michael Porter published Competitive Strategy , a work that shaped the thinking of a generation of academics and managers ([6] Crowther, 2008; [15] Magretta, 2012). Included in that foundational text (the first chapter, in fact) was Porter's description of "five forces" that shape the structure of all industries and in large part establish the rules of competition and the root causes of profitability within an industry ([23] Porter, 2008). The five forces are the threats posed by competitive rivalry, powerful buyers, powerful suppliers, potential new entrants, and substitute products. According to [25] Porter (1980, p. 3), "the collective strength of the forces determines the ultimate profit potential in the industry". But of more interest to Porter, as emphasized in his update of the five forces in 2008, is the potential to use the five forces framework to understand strategic implications for individual firms within an industry.
Challenges in using the five forces
The practical application of the five forces framework, however, has been more challenging. [23] Porter (2008) himself admits as much and describes common misapplications of the framework. [15] Magretta (2012), [1] Allio and Fahey (2012) and [14] Lee et al. (2012) also describe managerial difficulties. While working with practicing managers, small business owners, MBA and undergraduate business students, and other academics, I have witnessed many of the same things. The following challenges in using the five forces framework are taken from [23] Porter (2008), [15] Magretta (2012) and my own observations.
Lack of depth
Many people only understand the five forces framework and its use in an inordinately shallow way. At best, this leads to incomplete, inaccurate, and unhelpful analysis. At worst, it can lead to misanalysis, poor decision making, and disastrous organizational outcomes. Those of us in academia bear a good deal of the blame when it comes to a lack of depth in teaching students about the concepts and usage of the five forces framework. This begins with textbook coverage. I surveyed ten leading ([19] Napshin, 2010) strategic management textbooks and catalogued the coverage of the five forces in each (Table I [Figure omitted. See Article Image.]). The number of pages devoted to the five forces framework ranges from four to 21 pages. Only two of the textbooks provide...