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Are Porter’s Five Competitive Forces still Applicable? A Critical Examination concerning the Relevance for Today’s Business

Dälken, F (2014) Are Porter’s Five Competitive Forces still Applicable? A Critical Examination concerning the Relevance for Today’s Business.

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Abstract:Porter’s Five Forces model is a powerful management tool for analysing the current industry profitability and attractiveness by using the outside-in perspective. Within the last decades, the model has attracted some criticism because of the developing Internet economy. Due to an increasing significance of Digitalization, Globalization and Deregulation, the industry structure of the ‘Old Economy’ changed fundamentally. The ‘New Economy’ is not comparable with the ‘Old Economy’, which is the basis of the Five Forces model. Moreover the last decades have shown that Information Technology became more and more important. Nowadays Technology is one of the most important drivers for change and not only important for the implementation of change. The outcome of this critical literature review shows that the three new forces changed the industry structure but they do not restructure the model. Porter’s Five Forces cannot be considered as outdated. The basic idea that each company is operating in a network of Buyers, Suppliers, Substitutes, New Entrants and Competitors is still valid. The three new forces just influence each of the Five Forces. An example is that the Bargaining Power of Buyers increased due to the access to much more information because of the Internet. Furthermore the Threat of New Entrants decreased since companies have to make high investments in Technology which has a deterrent effect on new potential market entrants.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/65339
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