Porter's Five Forces Theory: Strategies. Part Two
Despite the above described well-structured model, Porter's five forces theory has been subject of great critique. Its main weak points result from the historical context in which it was developed. In the 1980s, cyclical growth characterized the world economy. Therefore, main corporate aims consisted of profitability and survival. A primary premise for achieving these aims has been optimization of strategy in relation to the external environment. In the 1980s, development in most industries has been stable if compared with today's dynamics.
In general, the significance of this model is reduced by the following factors: 1. In the economic sense, the model supposes a classic perfect market. The more an industry is controlled, the less significance insights the model can give. 2. The model is best used for analysis of simple market structures. A well-defined description and analysis of five forces are very difficult to use in complex industries with multiple interrelations, product groups and segments. A very narrow concentration on certain segments of these industries brings the risk of missing significant elements. 3. The model supposes relatively static market structures. This is not the case in today's dynamic markets. Technological progress and dynamic market entrants from start-ups may utterly change business models, entry barriers and relationships, as well as the supply chain. 4. Porter's five forces theory may be used for the further analysis of the situation. However, it will not present some significant advice for preventive actions. 5. Porter's model is based on the competition idea. It supposes that companies try to achieve competitive advantages over competitors in a market, as well as over suppliers and consumers. Porter's theory does not take into consideration such strategies as strategic alliances, electronic linking of data systems of companies, a value chain, virtual enterprise-networks, etc.
Knights (1992, pp. 514-536) states that ‘strategy is a form of imperialism located within a discourse which cloaks the power of managers as a class in culturally acceptable clothing of science and objectivity'. He explains Porter's theory via Michel Foucault's ideas. Knights points out that instructions for generic strategies are difficult to implement, generic strategies stay the legal discourse of choice by many managers. In order to try implementation ‘managers require a sense of ‘reality' which is based on the effects of forgetting, neglecting or denying the subjectivity, which is the obligatory condition to render the generic strategies possible' (Knights 1992, pp. 514-536).
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