Advantages and disadvantages of five-force model

Advantages and disadvantages: the model is not so much a practical strategic tool as a theoretical thinking tool. The theory of this model is based on the following three assumptions:

1, strategists need to know the information of the whole industry, which is obviously difficult to do in reality.

2. There is only a competitive relationship between the same industry, and there is no cooperative relationship. But in reality, there are many cooperative relationships between enterprises, which are not necessarily competitive relationships.

3, the industry scale is fixed, therefore, only by taking the opponent's share to occupy more resources and markets. But in reality, enterprises often do not eat their opponents, but make big cakes with them to get more resources and markets. At the same time, the market can increase its capacity through continuous development and innovation.

Extended data:

Michael Porter's main contribution to management theory is to build a bridge between industrial economics and management. The significance of Porter's competitiveness model is that there are three successful strategic ideas in the struggle of five kinds of competitiveness, namely, total cost leading strategy, differentiation strategy and concentration strategy.

Two enterprises in the same industry or different industries may compete with each other because of the substitution of their products. This kind of competition from substitutes will affect the competitive strategy of existing enterprises in the industry in various forms.

1. The improvement of product sales price and profit potential of existing enterprises will be limited by the existence of substitutes easily accepted by users.

2. Due to the invasion of substitute producers, existing enterprises must improve the product quality, or lower the selling price by reducing the cost, or make their products have characteristics, otherwise their sales and profit growth goals may be frustrated.

3. The competitive intensity of substitute producers is affected by the switching cost of product buyers.

In short, the lower the price, the better the quality, the lower the switching cost of users, and the stronger the competitive pressure it can produce; The intensity of this competitive pressure from substitute producers can be described by investigating the growth rate of substitute sales, the production capacity and profit expansion of substitute manufacturers.

Baidu Encyclopedia-Five Forces Model