analytical techniques for developing strategy" (Mintzberg, 1994, 107).
To make the thinking process more simple, Porter suggested that certain powerful forces are at work on any company, large or small. This fact is a given, argued Porter, and the more successful companies that were not only aware of these forces but were able to deal with them rationally. For instance, any company in any industry is going to face competition.
In recent business history, Netscape was a company that was without competition, since it was the progenitor of the Internet Browser market. The business idea was to give the product away for free from a central Web site, with the idea that advertising could then be sold on the Netscape Web site that would generate revenue. A second revenue source that would be based on registration.
Applying the Five Forces, we see that the company was a powerful supplier, it faced no threat from competition, was the leader in an industry which was not yet an industry, and didn't even face the force of buyers and consumers, since the product was free. For two years, Netscape was successful. From 1994 to 1996, Netscape was the only game in town. Until 1996, when Microsoft Corporation created a competitive product, Explorer that it also gave away free (Davis, 1998, 6).
Nee (1998), wrote in Fortune Magazine that Netscape "practically created today's Internet, has one of the most visited sites on the Web, has a large and growing corporate Internet software business--and still has the lion's share of the browser market. Netscape had $534 million in revenues last year, $261 million in the bank and no debt" (42).
When Netscape started out, it ignored the Five Forces
theory, and came up with management decisions that were proactive -- it called the shots and it made the rules. It was the threat of Microsoft that made the company reactive and its lack of strategic thinking became painfully obvious.
In the...