Strengths and Weaknesses of Porters Five Forces Analysis

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From this study, it is clear that the model was framed way back in the 1980s when the business trend was much more different than it is today. It provides a general overview of the external environment. Any new business can use it to analyze the market they are entering before starting their venture and customize their plan according to the results obtained from it. Though there are certain limitations, it covers more or less all the aspects a businessman should consider before starting a new venture.
As the study outlines Porters five forces model is by far the most simple and easiest tool to understand the industry structure. Understanding the industry structure is vital to plan effective strategies to gain a competitive edge. Industry structure is nothing but a set of characteristics which is shaped by the economic and technological factors prevalent there. Understanding the causes which determine the success or profit of one particular brand will help others plan their strategy accordingly. Porters five forces analysis helps them do the same. For example, consider a person wants to start an online shopping website. There are already thousands of shopping websites on the internet. They have to give something new and attractive to the customers and manage the heavy competition from others. Porter’s five forces model acts as a checklist of the new businessman enlisting all the important entities to be checked. They prompt them to check the core competitors in the industry first like eBay. The website owner might decide to cater the needs of certain kind of people interested in high-class antique products, as there are so many websites selling apparels and related accessories. Second, Porters model prompt them to check the threat of new entrants and substitutes.