Porter's Five Forces

Porter’s Five Forces is a strategy to help managers to make the right decision on the basis of organization’s external environment. It’s very important for managers to create and apply a strategy for organizations or even companies to build and control the benefits of competitive on the long run. Michael Porter pointed out that any industry is surrounded by five main elements and their collective reaction affects the profitability of that business such as threats of new entrants, threats of substitutes, bargaining power of the buyers, bargaining power of the suppliers and the overall rivalry or competitiveness (Porter, 1980). The framework model has it benefits and some firm is using this model but there are more limitations and much criticism from author and reader. In my opinion, in today’s rapidly changing environment, I personally think that it is not applicable in today environment.

It’s because, Porter's theory doesn’t into further details regarding either the managerial procedure for applying the desirable dynamic strategy or organizational learning procedure that will improvised the quality in the formulation and implementation of strategy. In other words, the theory doesn’t identify the managerial rules to active a dynamic process that changes the operational position of the firm so that it can acquire and keep a competitive advantage: "It means performing different activities from rivals, or performing similar activities in different ways "(Porter, 1980).

Besides that, static market structure is one of the limitations on Porter Five Forces. Economic situation in each country is changing. Porter’s model is analysis during the stable market and competitive structure in 1980’s and one could easily foresee the trends in various industries (Porter, 1980). But for today, basically it is not applicable in the current rapid change market dynamics or structures using in the business firm (Hamel and Prahalad, 1994). As in a high technological world, markets technologies and products affected today’s markets. Innovations technologies and dynamic market substitutes from start-ups will changed completely and affect the business into a highly competitive industry between each other. Porter’s model did not emphasize how technology developed and how technology may affect the market structures change in the future (Porter, 1990). Technology is a strong force on competitiveness in today. An example is how the e-banking has had an influence in the banking industry (Gupta, 2002). With technology, players at the same time can get into the industry and also reach a bigger market. With the Information of technology players in the market can create a competitive benefits as they acquire the wisdom of utilizing the technology in the new era for today which bring them more benefit (Lin, H.-J., 2004).

Another limitation of the model is that the changes of reposition implementing for the strategy