Development of the Quantitative Five Forces Analysis as a Strategic Management Tool (original) (raw)
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Global Journal of Management and Business Research, 2022
In this paper, I review and provide a more extensive theoretical grounding for Porter's five-forces model for the determination of the attractiveness of an industry. I argue that the model is incomplete given its implicit assumptions about a firm's financing activities in implementing its competitive strategy. I would suggest that an absolute paradigm for the determination of the attractiveness of an industry must take into consideration the industry's optimal capital structure as well as the tendency for the power of providers of debt capital to vary across industries and to be crucial in the formation of industry profitability. Therefore, I propose an extended model for the determination of the potential profit of an industry, incorporating the industry's optimal capital structure and the power of lenders. The pivotal connotation of this extended model is that the efforts of firm managers in formulating effective competitive strategies or in establishing a strategic position must not only consider ways of dealing with the bargaining power of buyers, the threat of entry, the negotiating power of suppliers, industry rivalry, and the threat of substitutes but must also account for the profit-contributory roles of both the optimal structure of the capital with which those strategies must be implemented and the power of lenders in setting constraints on the utilization of the firm's capital, culminating in the proposition of a seven-structure paradigm for the determination of the attractiveness of an industry.
Developing Competitive Strategies Based on SWOT Analysis in Porter's Five Forces Model by DANP
In such a competitive business area, companies which are especially pioneers in the sector try to develop sustainable and competitive strategies to retain their positions in the market. In this purpose, in literature many theories have been developed. Because each of those strategies have their own strong and weak sides, developing new strategical analyses keeps on. In this research an integrated model of SWOT (Strengths-Weakness-Opportunities-Threats) Analysis and Porter's Five Forces Model has been used to develop a competitive strategy model for a business firm in food sector by DEMATEL (Decision Making Trial and Evaluation Laboratory) and ANP (Analytic Network Process) techniques. Based on results, in regards of relative important items those are related to strengths and opportunities in competitors force which have considerable weights in the global weights table, maxi-maxi type competitive strategies have been developed for the company.
A Critical Analysis of Porter’s 5 Forces Model of Competitive Advantage
Social Science Research Network, 2020
The 5 forces of competitive advantage, as outlined by Porter, attempt to explain how firms can achieve Competitive Advantage in the industry they belong too. While this theory is certainly applicable to a fair degree, it is not free from its limitations. This paper critically analyses the Porter's 5 forces model while also comparing it with various other frameworks that attempt to explain Sustainable Competitive Advantage. It goes on to show the progress of tools used by management theorists to understand the importance of (sustainable) competitive advantage. This is done with the help of models that comprise of both the industry-based view, such as Porter's 5 forces, and the resource-based view, such as Barney's VRIN framework. The progress this paper looks at also includes relatively more revolutionary views and perspectives from thinkers like Grundy and Recklies. The paper broadly covers the explanation of the five forces with a few examples, after a short introduction, prior to examining the advantages and disadvantages of the framework. Here the paper outlines various other frameworks that suggest means of overcoming a few of the limitations highlighted in Porter's model. This includes the work of authors like Barney, Hamel & Prahalad, Teece et al., Penrose and various other esteemed management theorists. The paper finally concludes with the view on Porter's framework highlighting the most significant merits and demerits.
Competitiveness Analysis On The Axis Of Porter's 5 Forces Model: The Case Of Corum Manufacturing Industry, 2024
The ability of a country to increase its income, employment level and quality of life is expressed by the concept of competitiveness. This concept also involves the ability to balance international trade, exports and foreign trade. Within this broad definition, Porter (1990) suggests that the concept of competitiveness should be considered in a wide range of international competition, taking into account market segments, differentiated products, technology differences and economies of scale. In this context, competitiveness at the micro level (firm, industry) is determined by how the economic value created by the sector is divided, how much is in the hands of the companies in the sector, how much is reserved for bargaining with customers and suppliers, limited by substitutes or captured by potential new entrepreneurs. The study aims to examine the impact levels of Porter's five competitive forces which are (1) customers, (2) substitute products, (3) new ventures, (4) suppliers and (5) inter-firm competition on the competitiveness of the manufacturing industry in Çorum. According to the analyses, it is concluded that there is a positive relationship between the factors in Porter's 5 forces model and the competitiveness of the companies operating in the manufacturing industry in Çorum. According to the results, Factor 1: Intra-firm competition α=0.835, Factor 2: New entrants α=0.762, Factor 3: Customers α=0.834, Factor 4: Substitutes α=0.677 and Factor 5: Suppliers α=0.765 have an effect on the competitiveness of the manufacturing industry in Çorum.
Psychology and Education: A Multidisciplinary Journal , 2023
In the modern economy, competitive advantage needs to be maintained in every sector, from small local businesses to enormous multinational corporations, for them to advance in the competition. This study determined the relationship between the application of Porter's five forces on the competitive advantage of the motorcycle industry. The research used a descriptive-correlational research design and a purposive sampling technique. The data were gathered from one hundred twenty-five (125) top and middle-level managers of motorcycle dealers. The level of the application of Porter's five forces of motorcycle dealers in terms of the bargaining power of suppliers, bargaining power of customers, existence of substitutes, threats of new entrants, and competitive rivalry in the industry is high. Moreover, the level of competitive advantage of motorcycle dealers in terms of financial and non-financial aspects is also high. The findings indicate that the variables have a significant relationship, which means that when the level of the application of Porter's five forces increases, the level of competitive advantage also increases.
Journal of Economics
Strategic planning is fundamental in the process of deciding where an organization wants to find itself in the future and how it will get there. Strategic planning is a serious analysis of external factors that affect the success and failure of the organization and its activities and aims to solve the problems of the organization and strengthen internal factors. It contributes to the development of the capacity of the organization and to the efficiency in achieving the set goals and tasks. Porter five forces analysis is a framework that attempts to analyze the level of competition within an industry and business strategy development. It consists of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a business unit to reassess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability.
AN ANALYSIS OF THE OIL AND GAS INDUSTRY'S COMPETITIVENESS USING PORTER'S FIVE FORCES FRAMEWORK
The purpose of this paper is to analyse the oil and gas industry's competitiveness using Porter's Five Forces framework. The paper starts with an overview of the oil and gas industry and proceeds with analysing its competitiveness with implications to new firms that are considering entering into the industry. Then, it discusses strategy literature assumptions about future certainty and approaches to strategic decision making. Finally, it concludes with key points and recommendations.
Using the Analytical Network Process in Porter's Five Forces Analysis–Case Study in Philippines
This study investigates and demonstrates the quantitative indicator from combination of analytical network process (ANP) and Porter's five forces. The quantitative indicator can base on the weightage from supermatrix. It shows the priority for firm to face on the changing. The integration of ANP and fiver forces can set up a series of procedure to evaluate the current strategy by chosen the most important criteria. The evaluation framework is based on (i) multi-criteria decision making (MCDM) analysis which can determine the proper alternative from the series of criteria with regard to various conflicting forces, and (ii) analytic network process (ANP) method which can consider the effect of feedback and variance dependence. It supports the case firm in identifying the optimal strategy under global environment changing to gain a wide-ranging and actual execution.
International Journal of Management Cases, 2011
Development of marketing strategy of the company has to be based primarily on the results of the analysis of industrial structure. The best known framework for analysis and the analysis of structural features of industries-Five competitive forces model by Michael E. Porter, was used in this paper aiming at designing marketing strategies and the development of sustainable competitive advantage for one Croatian small bakery concerning the influence of five forces on the whole industry. The interpretation of the findings enabled owner of analyzed subject: to determine the attraction of bakery industry, to measure perceptions of the strength of competitive forces, to identify the existing competitive advantages and key success factors in the further development, to formulate appropriate marketing strategies and to predict future movements in the bakery industry. Although Porter's model is a simplified picture of the forces that affect the profitability of certain industries, results of this paper have undoubtedly shown that Porter's model is valuable even in the small business sector. Taking into account the contemporary dynamics and unpredictability of the turbulent market conditions, the model will surely continue to be one of the main tools in strategic analysis of different industries, but also the specific business entities, regardless of their size.
The Relevance Of Porter’s Five Forces In Today’s Innovative And Changing Business Environment
Journal of Marketing Management and Consumer Behavior, 2022
Porter’s five forces framework (rivalry existing competitors, threat of new entrants, power of suppliers and buyers, substitut products and services) is based on the perception that an organizational strategy should encounter the opportunities and threats in the organizations external setting. A competitive strategy should rest on an understanding of industry structures and the way they change. Porter argues that the aim of the strategist is to recognize and handle a competitive environment by directly looking at competitors, or to contemplate a broader perspective that competes against the organization (Porter, 1979). Arguably, technological advancements and different ways of strategic thinking, such as shaping the future, engaging with customers, and creating long-term value using innovative ways may have shifted Porter’s five forces thinking from competing in an existing competitive environment to seeking opportunities in new innovative markets. However, one may wonder, if organizations are up to par for stepping out of their current competitive market to become a pioneer in a new market environment. This paper outlines and focuses on the relevance of Porter’s five forces today and its appropriateness when managers are considering innovation and change. Additionally, there will be an exploration of alternative strategies that have similarities with Porter’s five forces.