The paper "Michael Porter’ s Five Forces Model" is a wonderful example of a report on management. Michael Porter’ s five forces model is a model that was developed by Michael E. Porter (a graduate of Harvard Business School) in 1979 as components of his complete strategic business and industry models. The other elements of Porter’ s model are the value chain and generic strategies. In this essay, we are going to look at Porter’ s Five Forces model, see how it can be applied in the IT industry, and criticize its usefulness.
This five forces model was developed by Porter as a substitute for carrying out a SWOT analysis which he regarded to be ad hoc and unsuitable. The model was designed to be used for industrial analysis and for the development of strategic business decisions. It applies knowledge in industrial economics to come up with forces that form the basis of competitive intensity of a given market and hence determining the market’ s attractiveness. In this case, attractiveness refers to the industry’ s profitability across the board. An industry is described as an unattractive one if the combination of these forces results in the decline in the overall profitability of the industry while an attractive industry I one where these forces combine to drive up the overall profitability of the industry.
The industry will be deemed to be very unattractive if it is close to a situation of “ pure competition” whereby all the firm’ s profits are made to normal profit. Of the five forces, three are related to external competition while the remaining two forces are related to internal ones. These forces were referred to by Michael Porter as the company’ s microenvironment as they are forces that are lost to a given company affecting its immediate performance in terms of its ability to satisfactorily serve its customers and its ability to make a profit.
Any variation to any of the five forces will usually compel a business unit to perform a reassessment of the whole market given the changes that have occurred in the industry’ s information in general. An individual business unit’ s profitability will not be equal to the industry’ s average as firms are expected to use different methods in the application of their business models and major competencies to achieve a profit that might be above the industry’ s.
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