Hi, Mac:

I believe Porter’s industry structure prescription of strategy will continue to be relevant for a long time to come! However, when you look at the impact of environmental regulation on innovation, for example, you see that it is of central interest to many industries and policy makers alike and perhaps warrants reflection and going beyond the Porter hypothesis!

Moreover, while traditional research adopts a top-down view of regulation and attempts to measure the innovation response, the more bottom-up view of contemporary theory argues that firms produce innovations that exceed compliance levels as a competitive strategy. In a recent research study the authors (Ford,  Steen,  & Verreynne, 2014) approached  this dichotomy by investigating innovation introduced by Australian oil and gas firms in light of environmental regulatory compliance burden and firm-level characteristics, including competitive capabilities.

The authors argued that the analyses of survey responses, executive-level interviews and conference proceedings reveal both regulatory (top-down) and competitive advantage (bottom-up) perspectives explain innovation in this industry. Regression analyses reveal that product/service and novel innovations (all types) are related to a high compliance burden, competitive skills, research and development activity, and engagement in formal collaborations. Interview and conference data add nuance to authors findings revealing collaborative compliance frameworks result in similar innovation outcomes!

• Ford, J. A., Steen, J., & Verreynne, M. (2014). How environmental regulations affect innovation in the Australian oil and gas industry: going beyond the Porter Hypothesis. Journal Of Cleaner Production, 84204-213.

Hope this helps!

Nadeem

Hi Mac, 

One of the strongest points of Porter's five-forces is the focus on understanding the generic forces that drive industry profitability. To a certain extent this is timeless. Developments in academia like the RBV or in real world like the growth of internet are not directly challenging his fundamental reasoning. 

At the same time you should realize that the five-forces framework is not a panacea for all situations.  Porter started as an economist in industrial organizations to understand industry structure. The same holds for the 2014 Nobel prize winner Jean Tirole. One of Tirole's contribution is a theory of two-sided platforms. Companies like google or Ebay have a business model that is based on connecting two different groups of customers. This is a situation where the traditional approach of Porter doesn't work any longer. The main reason is that it doesn't take into account that two sorts of markets have become connected through such two-sided platforms. In a way it is the question of the proper definition of the unit of analysis.

A brief introduction to two-sided markets and business strategy can be found in "Eisenmann, T., Parker, G., & Van Alstyne, M. W. (2006). Strategies for two-sided markets. Harvard business review, 84(10), 92."

Good luck with your question,

Tjeerd

The five forces model focuses on the barriers to entry, buyer bargaining power, bargaining power, industry rivalry, and the existence of substitute or complementary products or solutions. All five forces are generic, are exist in all industry and will continue to exist. Therefore, we should be able to use the model to analyze any industry at any time.

Dear Mac:

                 I would say, as Mr Zandberg says, that it depends on the industry you are studying. If it is a traditional one, then surely you can use Porter. However if you want to study newer industries, surely you´ll have to use other mechanisms and Porter. That point is key. Have in mind also, that the five forces model was the first work by Porter, afterwards he produced other important ideas, for instance the value chain. This one combined with five forces can give you a good analysis of a company and its situation, not just regarding environment but also the internal aspects.

Regards

Gustavo

Porter´s five forces has several limitations, some of which were identified by researchers right after publication of the 1980 book. Other limitations have come to light recently. One I would like to call your attention to is Porter's obsession with competition and his disbelief in the importance of cooperation. You should take a look at the Co-opetition model by Brandenburger and Nalebuff. They present an industry structure model which incorporates a 6th force: the Complementors.

yes Potters industry structure has been over taken by the need to systematically address the strategic challenges of innovation,new demand creation and with it,the creation of new market space

The Porter structure must be indeed positionned in its time, 30 years ago. Other frameworks like RBV, Hypercompetition, etc. have emerged. Even Porter himself is making propositions today that have evolved from his original writings. For instance, in "Competitive Strategy" he was stating that "The key to purchasing is to offset or surmount the sources of supplier power". In 2012, in the HBR "The Big Idea - Creating Shared Value." he states that "The traditional playbook calls for companies to commoditize and exert maximum bargaining power on suppliers to drive down prices—even when purchasing from small businesses or subsistence-level farmers.... Today some companies are beginning to understand that marginalized suppliers cannot remain productive or sustain, much less improve, their quality. By increasing access to inputs, sharing technology, and providing financing, companies can improve supplier quality and productivity while ensuring access to growing volume."

Analytics as the only sustainable competitive advantage

If it is acceptable, I will add an observation that is NOT related to Porter’s five forces model (which I agree with most of the comments is sufficiently generic to remain applicable). My comments below deal with Porter’s generic strategies. (The text below is an excerpt from one of my enterprise and corporate performance management books [EPM/CPM] ).

Porter’s writings outline three generic strategies to gain a competitive advantage which are briefly described below. My belief is that with today’s clock-speed and technology-driven markets and economies, each generic strategy has vulnerabilities:

Cost leadership strategy. This is accomplished via improving process efficiencies, unique access to low-cost inputs (e.g., labor or materials), vertical supply chain integration (from purchased components to final assembly), or avoiding certain costs. But today other firms, by using lean management techniques and data analysis methods, can quickly lower their costs. 

Differentiation strategy. This is accomplished by developing products or services that have unique traits that customers most value. Today, however,  the imitation or replication of products and services by competitors (e.g., smart phones) is much easier and quicker to do, and customer tastes are changing much faster. 

Focus strategy. This is accomplished by concentrating on a narrow customer segment (e.g., jewelry from Tiffanys) that has entrenched customer loyalty. But today, broad market-cost leaders or “micro-segmenters” can more easily invade a supplier’s space and erode its customers’ loyalty.

So if the accepted generic strategies are vulnerable, then how can an organization gain a competitive edge? Innovation has been heralded as essential to sustain an organization’s success, but on its own innovation is no longer a dependable source for competitive advantage. As just described, new products and services can be quickly copied, and the widespread availability of new technology has lowered the barriers to competition. In my opinion now that software applications are lowering the barriers for leveraging analytics, then agility through quicker and smarter decision making will become the best opportunity for attaining a sustainable competitive advantage. This is accomplishable through competency with business analytics. It means creating an organizational culture for metrics and analytics.

Porter's "Five Forces" remains a useful framework, but one of several (such as the BCG 2x2 matrix of Bruce Henderson). Having been a student of Michael's at HBS, I don't believe he himself views FF as the universal panacea for strategy development, nor subject to change, even replacement. Some good comments have been by other commentators above. I would add the following

The FF paradigm misses two essential aspects - one perennial and the other associated with technology and shifting Purchasing Power of Consumers.

Perennial:The essential issue for any strategy is how one manages capacity. If you control a sufficient amount of low cost, quality capacity then positively influence pricing, invest relatively less than competitors and one can own the markets. Porter's model subsumes this aspect, rather than making it central

Technology: The ongoing Digital Revolution/IoT is empowering individual consumers as never before. Mass media communication has gone to communication by the masses. Individuals are empowered by 24/7/365 access and near instant satisfaction. They have become more demanding and discerning and individual. They wish t be informed and engaged to decide. based on satisfying physical, emotional and social needs from offered products and services. Most producer-manufactures have NOT understood this shift. Porter's model gives too little weight to the implications of such change with its effects on investments (capacity and demand), pricing, costs and hence margins, free cash flow and returns.

www.justinjenk.com

This gave a good start point of analysing the environment. A number of other frameworks ahave evolved over time. One framework incorporating continuity and change forces has been give in the form of flowing stream strategy crystal. May be seen in Flowing stream strategy, Springer, 2013.

Michael Porter's five forces theory of competition and three generic strategies provide a basic understanding of competition and the forces influencing it.  Although coopetition and complementors have found strategic business importance, Porter's contribution will remain relevant in spite of internet replacing the 4Ps ( Product, Promotion, Price, Place )  of  marketing with    S I V A ( Solution, Information, Value, Accessibility ) .

Despite the time and his own company going bankrupt, there are interesting elements in his five forces model. I think that is a mistake to take it as absolute truth, and apply it to apply equations in Exact Sciences. Management companies are in the field of Humanities, where not fit absolute models.

Professor Porter wrote about how his model has stood the test of time in regard to the Internet, technology and other changes in business and society. He re-examined his classic 1979 HBR article "The Five Competitive Forces Shape Strategy" in a 2008 HBR article that reaffirms, updates and extends his classic work. There is also an informative and interesting interview of him on YouTube where he talks about how the five competitive forces are still relevant 30 years later.

https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/

https://www.youtube.com/watch?v=mYF2_FBCvXw

A debate persists around whether the Blue Ocean Strategy of Profs Kim and Mauborgne has supplanted the Porterian approach.  Bl]rue Ocean Strategy asserts that rather than compete with rivals head-on, create and move into uncontested spaces, with no rivalry, in order to enjoy sustained competitive advantage

it is relevant since it tell us about the state of industry of attractiveness.

but when the blue ocean strategy is introduced the question of industry rivalry will not provide the competitive edge that one need to possess.

Dear Mr. Serge:

Gral Mc Arthur said in his last speech before retiring that "old soldiers never die". With the logical differences, Porter and other important authors in strategy will never die, for instance: Ansoff, Mintzberg. Arguably Porter is one of the most important, perhaps strategy was already mature when he began to write and research in this field.

As a final answer, I would say that the model you use depend on the industry you analize. Porter may be a suitable tool for products in established industries, though it would not work acceptably in servics and modern industries such as internet and the like.

Best regards

Gustavo Concari