Abstract
Michael Porter’s five forces framework builds on the contribution of industrial organizational economics and is a relatively comprehensive tool for assessing the attractiveness of an industry in strategic management. We trace the origins of the framework, portray the components in the framework, briefly review the empirical works and examine its utility. Finally, we review some of the factors that limit the generalizability of the framework.
Michael Porter’s five forces framework portrays industry structure and explains its profitability. Industry structure analysis has implications for incumbents in an industry as well as for firms considering entry into the industry. Incumbents may develop effective strategies to deal with the threats from the different forces, while the profitability potential influences an entrant’s decision to enter the industry. This contribution discusses the origins and the elements of the framework and pinpoints its key limitations.
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Baburaj, Y., Narayanan, V.K. (2016). Five Forces Framework. In: Augier, M., Teece, D. (eds) The Palgrave Encyclopedia of Strategic Management. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-94848-2_632-1
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DOI: https://doi.org/10.1057/978-1-349-94848-2_632-1
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