The Validity of using Michael Porter's
in Modern Corporate Strategic Planning
In 1980, a Harvard economist, Michael Porter published a book called Competitive Advantage in which he analyzed the different ways in which companies can win long-term competitive advantage. The primary thrust of the book (at least the part which has been quoted for so long that it has become a management mantra) is Porter's "Five Forces Theory." In this Five Forces model, Porter assumed that companies, when planning strategic survival, must do so within the framework of five forces: the force of suppliers, the force of buyers, the force of potential new entrants, the force of substitute products, and the force of the competition level. This paper will analyze each of these forces in turn, while showing the strength of companies that have made use of this theory and the weakness of companies that have ignored the ramifications.
According to an article in The Economist, when Porter wrote his seminal 1980 work, business strategy theory was dominated by two conflicting schools. On one side, "the Harvard Business School urged companies to adjust to their unique circumstances" (Professor Porter, PHD..., 1994, 75). On the other side, "the Boston Consulting Group argued that planning can be based on a universal principle, the experience curve: the more a firm knows about a market, the more it can lower its price and increase its market share" (Professor Porter, PHD..., 1994, 75). Porter attempted to find a middle ground, one that would bridge these two concepts, and decided to use primary evidence in his analyses to search the answer for a basic question: What separates the winners from the losers in an industry? The answer, he decided, was an awareness factor. The company that had executives that "thought" were more successful than a company that had executives who only "performed." Porter, who is a widely read writer for The Economist, favors "...