Michael Porter authored “How Competitive Forces Shape Strategy” which launched decades of research that has impacted business practices that continue even today. Porter’s research as a Professor in Harvard’s Business School laid the foundation of his work in Strategy Formulation.
“Value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker.”
In exploring the implications of the five forces framework, Porter explains why a fast-growing industry is not always a profitable one, how eliminating today’s competitors through mergers and acquisitions can reduce an industry’s profit potential, how government policies play a role by changing the relative strength of the forces, and how to use the forces to understand complements.
Another approach, particularly when creating new market offerings, is developing a Blue Ocean strategy. This Theory states that innovation drives the creation of new markets. It finds business people asking, “What can we do that no one else has done and is so uniquely different it offers Sustainable Competitive Advantage?”
Five Forces or Blue Ocean? It depends on the industry, the product or service, potential life cycle and several other decision drivers. We help you consider how best to evaluate your offering, your market, and how to develop a strategy that can be measured, executed and sustained.
With the pace of change and innovation today it’s not enough to use the same old SWOT analysis based on the four elements; rather, by applying a SWOTT analysis to strategic thinking where the added element of Trends is included to Strengths, Weaknesses, Opportunities, Threats – and Trends you may see data that would otherwise be missed. SWOTT could be a useful approach to determine a Five Forces vs. Blue Ocean application to your initiative. We will help you look through a broader, clearer lens in developing strategy and sustainable growth within your industry and into new markets.
Learn more about our Strategy process here.