Maybe these models still have a place in the marketplace
The relevance of the models developed by Michael Porter still remains strong in the business environment. The macroeconomic challenges that surround these models make them relevant in a market where internationalisation plays a major role in the success of any business.
The simple approach of these models has changed the perceptions of governments and marketers. They have created a common framework for building strategies that support economic sustainability.
The five forces model has been widely used in the broader economic space to shift the direction of businesses. Businesses have used this framework to create a structured way to influence key stakeholders. It has also helped improve infrastructure to increase market capabilities. The value chain examines the primary and support activities of a business.
These have been used to support strategic alliances, especially when businesses expand internationally. The generic strategies focus on managing costs and increasing market leadership.
Changes in leadership and strategy often rely on Porter’s models. These models have been adapted to create a modern approach for managing internal and external business operations. They focus on competitive advantage and help to create value that supports sustainable investment and a strong strategic position.
The value chain addresses both internal and external environments. It helps businesses plan and coordinate their systems to meet operational needs.
The generic strategies help organisations differentiate their market activities from competitors. This is especially relevant when ownership or strategic direction changes. These strategies were designed to show how organisations can link strategy to overall performance. The generic strategies also support the core competency model.
Many organisations have adopted a cost leadership strategy to build a sustainable production system. Toyota’s use of the kaizen model under the Toyota Way is an example. Many organisations still use this approach when entering both emerging and developed markets. They aim to offer low priced products with high quality features.
Porter’s generic strategies can improve an organisation’s performance. Differentiation and focus strategies also emerge from this model. The idea of being different has led companies like Apple to innovate and offer creative products. These allow individuals to express themselves in different social contexts (Hesterly and Barney, 2010).
The focus strategy encourages businesses to target specific markets (Islami et al, 2020). Porter saw this strategy in two ways. It is not only about market focus but also about using a low-cost approach. This allows firms to operate in low-cost markets and set prices based on the needs of a chosen market segment.
Porter (1985) states that competitive advantage must be achieved when the value chain is correctly implemented. Both primary and support activities must work together. This is why Porter’s models remain important for businesses that aim to sustain a competitive edge and maintain strong market positions. The value chain plays a key role in internal operations. Yi-Chan Chung et al (2008) highlight that the value chain links to quality management and benchmarking, which can improve quality circles. The value chain provides a strong structure for building relationships with suppliers and other partners.
Kristina and Paul (2005) argue that the value chain is a useful tool for policymakers. It helps them understand how to use support activities effectively. The value chain supports sustainable production and supply chain management. It helps businesses manage risks, meet customer demand, and keep processes transparent. Cost control is maintained to ensure the value chain runs at full capacity.
Aside from production, customer service is also a key support activity. Slywotzky and Morrison (1999) say that understanding customer needs helps create strong products and services. This builds core competencies (Prahalad and Hamel, 1979).
Porter designed the value chain to deliver value at every stage. Walter and Lancaster (2000) support this. They say the connection between supply chain, logistics, and the value chain makes it a powerful tool. Porter also considered stakeholders. He designed support activities to offer value to policymakers, management, and customers.
The value chain has improved the efficiency of business operations. But the five forces model offers a different perspective. It helps businesses understand their industry and predict what may happen when entering a new one. The five forces give businesses the drive to shape their models in a competitive space. This includes analysing both the micro and macro environments. Government policies may also change based on individual elements of the five forces (Mohapatra, 2012).
Bruijl (2018) notes that profit sharing is linked to the five forces. He also highlights their connection to innovation. When Porter created the model in the 1980s, innovation was not a major concern. The internet had not yet become a mass market tool. But Porter later acknowledged that deregulation, globalisation, and digitalisation have changed the forces (Downes, 1997; Larry et al, 2014; Bruijl, 2018).
The threat of new entrants now includes technological change. This helps businesses assess how new technology can reshape an industry. The model remains highly relevant, especially in today’s innovation-led markets. Its ongoing use in education shows that each element of the five forces is still important in change management and strategy.
In conclusion, the relevance of Porter’s models remains strong in the current market. Although economic and political forces have altered how markets operate, the models still hold value. Porter created three simple but powerful tools to help organisations understand their industries and stakeholders. Globalisation, deregulation, and digitalisation have made these models more applicable. They continue to guide business planning and strategic development.
References
- Downes, L. (1997). Beyond Porter. Context Magazine. [online] [accessed on 19 May 2022]
- Larry, M., Shamir, L., & Johnson, F. (2014). The 5 competitive forces framework in a technology-mediated environment. Do these forces still hold in the industry of the 21st century? Thesis. University of Twente, Faculty of Management and Governance. [online] [accessed on 17 May 2022]
- Porter, M. (1979). How competitive forces shape strategy. Harvard Business Review, March Issues. [online][accessed on 1 June 2022]
- Porter, M. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York, NY: The Free Press.
- Porter, M. (1985). On competition. Updated and Expanded Edition. Boston, MA: Harvard Business School Publishing.
- Mohapatra, S. (2012). IT and porter’s competitive forces model and strategies. In Information Systems Theory (pp. 265-281). New York: Springer
- Bruijl, G. (2018). The Relevance of Porter’s Five Forces in Today’s Innovative and Changing Business Environment. SSRN Electronic Journal. 10.2139/ssrn.3192207.
- Yi-Chan Chunga et al (2008). A study of the business value of Total Quality Management. Total Quality Management, 19 (4), 367–379
- Kristina, D., and Paul, E., (2005) Combining economic and environmental dimensions: Value chain analysis of UK iron and steel flows. Ecological Economics, 58, 507-519
- Walter. D and Lancaster .G (2000). Implementing value strategy through the value chain. Management Decision, 38 (3), 166-178
- Hesterly W., and Barney, J., (2010) Strategic management and competitive advantage. New York: Pearson Prentice Hall
- Islami, X., Mustafa, N., and Latkovikj, T. M., (2020) Linking Porter’s generic strategies to firm performance. Future Business Journal, 6 (1), 3-18
