Strategic Frameworks Porter’s 5 Forces
Michael Porter’s Five Forces is a framework for analyzing competition of a business and helps to determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability. It is often used to make a qualitative evaluation of a firm’s strategic position. However, the framework is only a starting point and other types of analysis are often used in conjunction with the Five Forces model. The Five Forces framework should be used at the line-of-business industry level; it is not designed to be used at the industry group or sector level.
Porter developed his five forces framework in reaction to the popular SWOT Analysis which he found lacking in rigor. It has been applied to a diverse range of problems, from helping businesses become more profitable to helping governments stabilize industries.
The Five Forces framework takes extensive time and resources to complete and often lacks practical direction for small and mid size organizations. However, the general framework can be used to help explain how, where, and why competitive rivalry develops. For leaders of small to mid size organizations, it offers a fairly comprehensive list of elements to be examined that, once completed, will help drive stronger strategy decision making.