Porter's Five Forces Framework - Revision history

Wout Jennissen: /* References */

2022-03-18T13:59:11Z

References

← Older revision		Revision as of 13:59, 18 March 2022
Line 97:		Line 97:
	<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>		<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>
	<ref name="R10">Project Management Institute (2019). ''The Standard for Risk Management in Portfolios, Programs, and Projects.'' </ref>		<ref name="R10">Project Management Institute (2019). ''The Standard for Risk Management in Portfolios, Programs, and Projects.'' </ref>
	<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management" (4th ed.). </ref>		<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management'' (4th ed.). </ref>


	[[Category: Portfolio Management]] [[Category: Project Management]]		[[Category: Portfolio Management]] [[Category: Project Management]]

Wout Jennissen: /* References */

2022-03-18T13:58:01Z

References

← Older revision		Revision as of 13:58, 18 March 2022
Line 97:		Line 97:
	<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>		<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>
	<ref name="R10">Project Management Institute (2019). ''The Standard for Risk Management in Portfolios, Programs, and Projects.'' </ref>		<ref name="R10">Project Management Institute (2019). ''The Standard for Risk Management in Portfolios, Programs, and Projects.'' </ref>
	<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management (4th ed.).'' </ref>		<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management" (4th ed.). </ref>


	[[Category: Portfolio Management]] [[Category: Project Management]]		[[Category: Portfolio Management]] [[Category: Project Management]]

Wout Jennissen: /* References */

2022-03-18T13:57:40Z

References

← Older revision		Revision as of 13:57, 18 March 2022
Line 97:		Line 97:
	<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>		<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>
	<ref name="R10">Project Management Institute (2019). ''The Standard for Risk Management in Portfolios, Programs, and Projects.'' </ref>		<ref name="R10">Project Management Institute (2019). ''The Standard for Risk Management in Portfolios, Programs, and Projects.'' </ref>
	<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management ~~— Fourth Edition~~.'' </ref>		<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management (4th ed.).'' </ref>


	[[Category: Portfolio Management]] [[Category: Project Management]]		[[Category: Portfolio Management]] [[Category: Project Management]]

Wout Jennissen: /* References */

2022-03-18T13:55:01Z

References

← Older revision		Revision as of 13:55, 18 March 2022
Line 96:		Line 96:
	<ref name="R8"> Project Management Institute, Inc. (2021). ''A guide to the Project Management Body of Knowledge (Pmbok guide) and the standard for Project Management.'' </ref>		<ref name="R8"> Project Management Institute, Inc. (2021). ''A guide to the Project Management Body of Knowledge (Pmbok guide) and the standard for Project Management.'' </ref>
	<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>		<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>
	<ref name="R10">Project Management Institute (2019). ''The ~~standard~~ for ~~risk management~~ in ~~portfolios~~, ~~programs~~, and ~~projects~~.'' </ref>		<ref name="R10">Project Management Institute (2019). ''The Standard for Risk Management in Portfolios, Programs, and Projects.'' </ref>
	<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management — Fourth Edition.'' </ref>		<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management — Fourth Edition.'' </ref>


	[[Category: Portfolio Management]] [[Category: Project Management]]		[[Category: Portfolio Management]] [[Category: Project Management]]

Wout Jennissen: /* References */

2022-03-18T13:54:02Z

References

← Older revision		Revision as of 13:54, 18 March 2022
Line 94:		Line 94:
	<ref name="R6"> Brandenburger, A. M. & Nalebuff, B.J. (1995). The Right Game: Use Game Theory to Shape Strategy. ''Harvard Business Review, 73''(4), 57–71. </ref>		<ref name="R6"> Brandenburger, A. M. & Nalebuff, B.J. (1995). The Right Game: Use Game Theory to Shape Strategy. ''Harvard Business Review, 73''(4), 57–71. </ref>
	<ref name="R7"> Wernerfelt, B. (1984). A Resource-based View of the Firm. ''Strategic Management Journal, 5''(2), 171–180. https://doi.org/10.1002/smj.4250050207 </ref>		<ref name="R7"> Wernerfelt, B. (1984). A Resource-based View of the Firm. ''Strategic Management Journal, 5''(2), 171–180. https://doi.org/10.1002/smj.4250050207 </ref>
	<ref name="R8"> Project Management Institute, Inc. (2021). A guide to the Project Management Body of Knowledge (Pmbok guide) and the standard for Project Management. </ref>		<ref name="R8"> Project Management Institute, Inc. (2021). ''A guide to the Project Management Body of Knowledge (Pmbok guide) and the standard for Project Management.'' </ref>
	<ref name="R9"> Züst Rainer, & Troxler, P. (2006). No more muddling through mastering complex projects in engineering and management. Springer. </ref>		<ref name="R9"> Züst Rainer, & Troxler, P. (2006). ''No more muddling through mastering complex projects in engineering and management.'' Springer. </ref>
	<ref name="R10">Project Management Institute (2019). The standard for risk management in portfolios, programs, and projects. </ref>		<ref name="R10">Project Management Institute (2019). ''The standard for risk management in portfolios, programs, and projects.'' </ref>
	<ref name="R11">Project Management Institute (2017). The Standard for Program Management — Fourth Edition. </ref>		<ref name="R11">Project Management Institute (2017). ''The Standard for Program Management — Fourth Edition.'' </ref>


	[[Category: Portfolio Management]] [[Category: Project Management]]		[[Category: Portfolio Management]] [[Category: Project Management]]

Wout Jennissen: /* References */

2022-03-18T13:46:39Z

References

← Older revision		Revision as of 13:46, 18 March 2022
Line 96:		Line 96:
	<ref name="R8"> Project Management Institute, Inc. (2021). A guide to the Project Management Body of Knowledge (Pmbok guide) and the standard for Project Management. </ref>		<ref name="R8"> Project Management Institute, Inc. (2021). A guide to the Project Management Body of Knowledge (Pmbok guide) and the standard for Project Management. </ref>
	<ref name="R9"> Züst Rainer, & Troxler, P. (2006). No more muddling through mastering complex projects in engineering and management. Springer. </ref>		<ref name="R9"> Züst Rainer, & Troxler, P. (2006). No more muddling through mastering complex projects in engineering and management. Springer. </ref>
	<ref name="R10">Project Management Institute. (2019). The standard for risk management in portfolios, programs, and projects. </ref>		<ref name="R10">Project Management Institute (2019). The standard for risk management in portfolios, programs, and projects. </ref>
	<ref name="R11">Project Management Institute. (2017). The Standard for Program Management — Fourth Edition. </ref>		<ref name="R11">Project Management Institute (2017). The Standard for Program Management — Fourth Edition. </ref>


	[[Category: Portfolio Management]] [[Category: Project Management]]		[[Category: Portfolio Management]] [[Category: Project Management]]

Wout Jennissen: /* Limitations */

2022-03-18T13:43:07Z

Limitations

← Older revision		Revision as of 13:43, 18 March 2022
Line 66:		Line 66:
	==Limitations==		==Limitations==
	Despite the usefulness of Porter’s framework to explore the potential value of industries and its entry barriers, it has some major limitations according to academics and strategists. Analyzing the real world and modeling it as a system whilst evaluating multidimensional aspects/criteria is key to mastering project management in engineering and management.<ref name="R9" /> However, assumptions that have been made on which the model is based can be contested.<ref name="R3" /> First of all, Porter’s Five Forces framework assumes that buyers, competitors and suppliers are separate forces that are not interacting or conspiring. This is of course not the case in real life, as these forces do interact, which could have major impact on industries. Secondly, it is assumed that structural advantage is the main source of value according to the framework – in the form of entry barriers. However, in strategic decisions, entry barriers are just a part of the value that is formed. Finally, it is assumed that participants are able to respond to all changes in the market timely, and that uncertainty is low. In practice, this is not the case in most industries, as flexibility is often demanded throughout the development of markets and industries. Moreover, it is hard to evaluate the potential of an industry, without properly taking into account the resources that a firm has relative to the industry. This so-called resource-based view could help to add a crucial dimension to the framework.<ref name="R7" /> In other words, the model places too much weight on the macro-environment, and does not take into account all major factors that could influence industry potential.<ref name="R5" />		Despite the usefulness of Porter’s framework to explore the potential value of industries and its entry barriers, it has some major limitations according to academics and strategists. Analyzing the real world and modeling it as a system whilst evaluating multidimensional aspects/criteria is key to mastering project management in engineering and management.<ref name="R9" /> However, assumptions that have been made on which the model is based can be contested.<ref name="R3" /> First of all, Porter’s Five Forces framework assumes that buyers, competitors and suppliers are separate forces that are not interacting or conspiring. This is of course not the case in real life, as these forces do interact, which could have major impact on industries. Secondly, it is assumed that structural advantage is the main source of value according to the framework – in the form of entry barriers. However, in strategic decisions, entry barriers are just a part of the value that is formed. Finally, it is assumed that participants are able to respond to all changes in the market timely, and that uncertainty is low. In practice, this is not the case in most industries, as flexibility is often demanded throughout the development of markets and industries. Moreover, it is hard to evaluate the potential of an industry, without properly taking into account the resources that a firm has relative to the industry. This so-called resource-based view could help to add a crucial dimension to the framework.<ref name="R7" /> In other words, the model places too much weight on the macro-environment, and does not take into account all major factors that could influence industry potential.<ref name="R5" />


	Next to the limitations that are based on the underlying assumptions of the model, another problem arises. Porter’s Five Forces model includes five forces, which can be questioned, as it could be the case that more forces exist in the context of industry competition. Several academics and strategists have insisted on adding a sixth force. Suggestions for a sixth forces to include are complementors<ref name="R6" /> – based on the idea of game theory – and a governmental force that also includes pressure groups. Porter has rejected all these additions, as they should be considered as “factors” that affect the Five Forces Model.<ref name="R4" />		Next to the limitations that are based on the underlying assumptions of the model, another problem arises. Porter’s Five Forces model includes five forces, which can be questioned, as it could be the case that more forces exist in the context of industry competition. Several academics and strategists have insisted on adding a sixth force. Suggestions for a sixth forces to include are complementors<ref name="R6" /> – based on the idea of game theory – and a governmental force that also includes pressure groups. Porter has rejected all these additions, as they should be considered as “factors” that affect the Five Forces Model.<ref name="R4" />


	A final criticism is that the framework does not provide any solutions or directions for the identified industry potential. The model could have been more useful if clear directions were given on how to deal with identified threats in the industry.<ref name="R5" />		A final criticism is that the framework does not provide any solutions or directions for the identified industry potential. The model could have been more useful if clear directions were given on how to deal with identified threats in the industry.<ref name="R5" />

Wout Jennissen: /* Limitations */

2022-03-18T13:42:52Z

Limitations

← Older revision		Revision as of 13:42, 18 March 2022
Line 66:		Line 66:
	==Limitations==		==Limitations==
	Despite the usefulness of Porter’s framework to explore the potential value of industries and its entry barriers, it has some major limitations according to academics and strategists. Analyzing the real world and modeling it as a system whilst evaluating multidimensional aspects/criteria is key to mastering project management in engineering and management.<ref name="R9" /> However, assumptions that have been made on which the model is based can be contested.<ref name="R3" /> First of all, Porter’s Five Forces framework assumes that buyers, competitors and suppliers are separate forces that are not interacting or conspiring. This is of course not the case in real life, as these forces do interact, which could have major impact on industries. Secondly, it is assumed that structural advantage is the main source of value according to the framework – in the form of entry barriers. However, in strategic decisions, entry barriers are just a part of the value that is formed. Finally, it is assumed that participants are able to respond to all changes in the market timely, and that uncertainty is low. In practice, this is not the case in most industries, as flexibility is often demanded throughout the development of markets and industries. Moreover, it is hard to evaluate the potential of an industry, without properly taking into account the resources that a firm has relative to the industry. This so-called resource-based view could help to add a crucial dimension to the framework.<ref name="R7" /> In other words, the model places too much weight on the macro-environment, and does not take into account all major factors that could influence industry potential.<ref name="R5" />		Despite the usefulness of Porter’s framework to explore the potential value of industries and its entry barriers, it has some major limitations according to academics and strategists. Analyzing the real world and modeling it as a system whilst evaluating multidimensional aspects/criteria is key to mastering project management in engineering and management.<ref name="R9" /> However, assumptions that have been made on which the model is based can be contested.<ref name="R3" /> First of all, Porter’s Five Forces framework assumes that buyers, competitors and suppliers are separate forces that are not interacting or conspiring. This is of course not the case in real life, as these forces do interact, which could have major impact on industries. Secondly, it is assumed that structural advantage is the main source of value according to the framework – in the form of entry barriers. However, in strategic decisions, entry barriers are just a part of the value that is formed. Finally, it is assumed that participants are able to respond to all changes in the market timely, and that uncertainty is low. In practice, this is not the case in most industries, as flexibility is often demanded throughout the development of markets and industries. Moreover, it is hard to evaluate the potential of an industry, without properly taking into account the resources that a firm has relative to the industry. This so-called resource-based view could help to add a crucial dimension to the framework.<ref name="R7" /> In other words, the model places too much weight on the macro-environment, and does not take into account all major factors that could influence industry potential.<ref name="R5" />


	Next to the limitations that are based on the underlying assumptions of the model, another problem arises. Porter’s Five Forces model includes five forces, which can be questioned, as it could be the case that more forces exist in the context of industry competition. Several academics and strategists have insisted on adding a sixth force. Suggestions for a sixth forces to include are complementors<ref name="R6" /> – based on the idea of game theory – and a governmental force that also includes pressure groups. Porter has rejected all these additions, as they should be considered as “factors” that affect the Five Forces Model.<ref name="R4" />		Next to the limitations that are based on the underlying assumptions of the model, another problem arises. Porter’s Five Forces model includes five forces, which can be questioned, as it could be the case that more forces exist in the context of industry competition. Several academics and strategists have insisted on adding a sixth force. Suggestions for a sixth forces to include are complementors<ref name="R6" /> – based on the idea of game theory – and a governmental force that also includes pressure groups. Porter has rejected all these additions, as they should be considered as “factors” that affect the Five Forces Model.<ref name="R4" />


	A final criticism is that the framework does not provide any solutions or directions for the identified industry potential. The model could have been more useful if clear directions were given on how to deal with identified threats in the industry.<ref name="R5" />		A final criticism is that the framework does not provide any solutions or directions for the identified industry potential. The model could have been more useful if clear directions were given on how to deal with identified threats in the industry.<ref name="R5" />

Wout Jennissen: /* Limitations */

2022-03-18T13:42:44Z

Limitations

← Older revision		Revision as of 13:42, 18 March 2022
Line 67:		Line 67:
	Despite the usefulness of Porter’s framework to explore the potential value of industries and its entry barriers, it has some major limitations according to academics and strategists. Analyzing the real world and modeling it as a system whilst evaluating multidimensional aspects/criteria is key to mastering project management in engineering and management.<ref name="R9" /> However, assumptions that have been made on which the model is based can be contested.<ref name="R3" /> First of all, Porter’s Five Forces framework assumes that buyers, competitors and suppliers are separate forces that are not interacting or conspiring. This is of course not the case in real life, as these forces do interact, which could have major impact on industries. Secondly, it is assumed that structural advantage is the main source of value according to the framework – in the form of entry barriers. However, in strategic decisions, entry barriers are just a part of the value that is formed. Finally, it is assumed that participants are able to respond to all changes in the market timely, and that uncertainty is low. In practice, this is not the case in most industries, as flexibility is often demanded throughout the development of markets and industries. Moreover, it is hard to evaluate the potential of an industry, without properly taking into account the resources that a firm has relative to the industry. This so-called resource-based view could help to add a crucial dimension to the framework.<ref name="R7" /> In other words, the model places too much weight on the macro-environment, and does not take into account all major factors that could influence industry potential.<ref name="R5" />		Despite the usefulness of Porter’s framework to explore the potential value of industries and its entry barriers, it has some major limitations according to academics and strategists. Analyzing the real world and modeling it as a system whilst evaluating multidimensional aspects/criteria is key to mastering project management in engineering and management.<ref name="R9" /> However, assumptions that have been made on which the model is based can be contested.<ref name="R3" /> First of all, Porter’s Five Forces framework assumes that buyers, competitors and suppliers are separate forces that are not interacting or conspiring. This is of course not the case in real life, as these forces do interact, which could have major impact on industries. Secondly, it is assumed that structural advantage is the main source of value according to the framework – in the form of entry barriers. However, in strategic decisions, entry barriers are just a part of the value that is formed. Finally, it is assumed that participants are able to respond to all changes in the market timely, and that uncertainty is low. In practice, this is not the case in most industries, as flexibility is often demanded throughout the development of markets and industries. Moreover, it is hard to evaluate the potential of an industry, without properly taking into account the resources that a firm has relative to the industry. This so-called resource-based view could help to add a crucial dimension to the framework.<ref name="R7" /> In other words, the model places too much weight on the macro-environment, and does not take into account all major factors that could influence industry potential.<ref name="R5" />

	Next to the limitations that are based on the underlying assumptions of the model, another problem arises. Porter’s Five Forces model includes five forces, which can be questioned, as it could be the case that more forces exist in the context of industry competition. Several academics and strategists have insisted on adding a sixth force. Suggestions for a sixth forces to include are complementors<ref name="R6" /> – based on the idea of game theory – and a governmental force that also includes pressure groups. Porter has rejected all these additions, as they should be considered as “factors” that affect the Five Forces Model.<ref name="R4~~" /> Creating awareness of the complete environment, including technical, political, market and economic aspects is key to to the success of projects.<ref name="R8~~" />		Next to the limitations that are based on the underlying assumptions of the model, another problem arises. Porter’s Five Forces model includes five forces, which can be questioned, as it could be the case that more forces exist in the context of industry competition. Several academics and strategists have insisted on adding a sixth force. Suggestions for a sixth forces to include are complementors<ref name="R6" /> – based on the idea of game theory – and a governmental force that also includes pressure groups. Porter has rejected all these additions, as they should be considered as “factors” that affect the Five Forces Model.<ref name="R4" />

	A final criticism is that the framework does not provide any solutions or directions for the identified industry potential. The model could have been more useful if clear directions were given on how to deal with identified threats in the industry.<ref name="R5" />		A final criticism is that the framework does not provide any solutions or directions for the identified industry potential. The model could have been more useful if clear directions were given on how to deal with identified threats in the industry.<ref name="R5" />

Wout Jennissen: /* Exploiting industry change */

2022-03-18T13:42:22Z

Exploiting industry change

← Older revision		Revision as of 13:42, 18 March 2022
Line 62:		Line 62:
	The framework can help to set up a diversification strategy, which is interesting for companies who are managing portfolios of potential new products or services. Moreover, based on the five forces, key characteristics of the industry can be determined in the form of economies of scale, brand identity, overhead costs, experience curves and capital costs required to compete. In other words, it provides a roadmap to determine the complex issue of determining the future value - or potential – of a business.<ref name="R1" />		The framework can help to set up a diversification strategy, which is interesting for companies who are managing portfolios of potential new products or services. Moreover, based on the five forces, key characteristics of the industry can be determined in the form of economies of scale, brand identity, overhead costs, experience curves and capital costs required to compete. In other words, it provides a roadmap to determine the complex issue of determining the future value - or potential – of a business.<ref name="R1" />

	Not only the five forces should be considered when formulating a strategy. As mentioned earlier, the analysis could be complemented by other tools for strategic analysis such as a [[SWOT analysis\|SWOT analysis]], [[Balanced Scorecard in Project Portfolio Management\|balanced scorecard]], OGSM and the PESTEL analysis. Moreover, different factors should be taken into account that are not considered as forces, but are key to the dynamics of forces within a competitive industry, such as: industry growth rate, technology and innovation, governmental forces, and complementary goods and services.		Not only the five forces should be considered when formulating a strategy. As mentioned earlier, the analysis could be complemented by other tools for strategic analysis such as a [[SWOT analysis\|SWOT analysis]], [[Balanced Scorecard in Project Portfolio Management\|balanced scorecard]], OGSM and the PESTEL analysis. Moreover, different factors should be taken into account that are not considered as forces, but are key to the dynamics of forces within a competitive industry, such as: industry growth rate, technology and innovation, governmental forces, and complementary goods and services. Creating awareness of the complete environment, including technical, political, market and economic aspects, is key to to the success of projects.<ref name="R8" />

	==Limitations==		==Limitations==