Industry Attractiveness and Five Forces
Assumptions behind Porter's model, developed in 80s, do not completely hold good in current markets; I do not say that these assumptions were good in 80s; but more assumptions are broken these days.
(1) Competition vs. Collaboration/ Co-opetation - a powerful concept relevant to today's market- by Prahlad and Hamel- Porter's model does not consider alliances, collaborations and partnerships.
(2) Innovation: Schumpeter's theory of creative destruction. Porter's model does not consider it at all. A firm(extend to Industry) can /should kill its current products/cash cows by bringing innovative/advanced products: E.g: iPhone, Blu-ray/HD vs. normal definition
(3) Predictable /stable/static: definition of industry , market and regulations. In today's market, these definitions dynamically change and constantly evolve.
E.g: Which industry does Google belong to? What about Apple? who regulates 'rules of internet'? Define plagiarism? Is sharing information correct/incorrect? what's information? who owns it?
(4) Interactions between Suppliers, buyers and the firm? What if: a buyer is also a supplier? E.g: eBay. Porter's model does not account for these interactions.
Porter's model a simple framework to perform initial analysis. But do not reach any conclusion and make any recommendation just by using Porter's model.
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