Porter generic model is one of the most important model frameworks of the business history. This model strategy is recognized as a leading authority on and competitiveness.
Today, Porter generic strategies generate analytical tools used by business schools, managers, and public policy makers. Porter’s model is used by health care, non-profit organization strategy, economic development. (Institute for Strategy and Competitiveness, 2008).
Porter’s generic strategies are a standard equipment of the manager’s toolbox. Porter model are applicable to a large variety of situations and contexts.
Porter’s generic business strategies provide a set of methods in order to create a defendable business strategy. They also allow firms that use them successfully to gain a competitive advantage over other firms in the industry. Clearly, porter generic has a real impact on strategy research and practice even today global environment.
But, Despite of is one of the most important toolbox of the business, the generic strategies developed by Porter in 1980 were criticised by many academic and professional authors. Indeed, porter’s generic strategies offer some guidance but many operations strategy decisions cannot be made with only the advice offered by Porter. Today, in the result, Porters generic strategies have become just one tool from the manager’s toolbox.
The new competitive conditions of the 21st century require a re-formulation of this model.
Porter’s ideas became more and more subject of critique under the dynamic change that has occurred within the market in recent time. These changes include globalisation, digitisation (Internet), and de-regulation behalf Downes. Critics point out that economic conditions have changed fundamentally since that time. The rise of the Internet, the technologies and of various e-business applications has strongly influenced nearly all industries. In fact, Porters theories base on the economic situation in the eighties. Behalf Mintzberg, the model cannot explain or analyze today’s dynamic changes that have the power to transform whole industries.
Porter generic strategies only give a good starting vision for exploring the topic of cost leadership and differentiation. According to (Lynch, 2003) In the case of growing market the Porter generic analysis couldn’t provide an appropriate strategic vision. Today’s global environment it is important to use other analyses such as PESTEL analysis. Other useful analyses would include SWOT analysis, analysis of the key success factors strategic group, competence and resource.
Every strategy should base on a careful analysis of all internal and external factors and on their potential future development.
Several authors have commented the application of generic strategies showing the lack of specificity, lack of flexibility of this model and it is limited in today’s global environment.
For example, Knights (1992) reported on research in a financial services firm. He found the model difficult to follow in practice because costs of a firm’s own operations, let alone competitors, are not calculable, and products are easily imitated.
Pitelis and Taylor (1996) argued that a value for money strategy was becoming a preferred strategy for corporate success despite -or indeed because – it is one of being stuck in the middle. We can conclude that Porter generic strategies for achieving competitive advantage are deficient.
In particular, Miller (1992) questions the notion of being “caught in the middle”. He claims that there is a viable middle ground between strategies. Many companies, for example, have entered a market as a niche player and gradually expanded. According to Baden-Fuller and Stopford (1992) the most successful companies are the ones that can resolve what they call “the dilemma of opposites”.
A popular post-Porter model was presented by W. Chan Kim and Renée Mauborgne in their 1999 Harvard Business Review article “Creating New Market Space”. In this article they described a “value innovation” model in which companies must look outside their present paradigms to find new value propositions. Their approach fundamentally goes against Porter’s concept that a firm must focus either on cost leadership or on differentiation. They later went on to publish their ideas in the book Blue Ocean Strategy.
We can conclude that Porter generic strategies for achieving competitive advantage are deficient.
However, one of the main limitations outlined by critics is the obsolescence of the model in the present competitive market conditions, when new sources of competitive advantage are available to companies. That’s why we will focus our analysis on the new source of competitive advantage and we will see if these sources are effective or if it just a mere of chimera of marketing management.
Commentary on this essay:
While the Porter Generic Model, also known as Porter’s 5 Forces, is widely used and respected as a tool for analyzing competition in an industry, it does have some limitations.
- One limitation is that the model focuses primarily on external factors and does not take into account internal factors such as a company’s culture, leadership, and capabilities. A company may have a strong competitive position in an industry despite facing unfavorable external forces if it has a strong internal structure and unique capabilities.
- Another limitation is that the model assumes a static industry structure, which may not be the case in rapidly changing industries. Disruptive technologies and innovations can quickly change the competitive landscape of an industry and render the model’s analysis outdated. The model also assumes that the five forces operate independently of each other, whereas in reality, they may be interdependent and mutually reinforcing.
- Moreover, the model’s focus on existing competition may limit its usefulness in identifying potential new entrants or substitutes. For instance, the rise of digital disruption has enabled new entrants to disrupt traditional industries in ways that were not previously possible.
- Lastly, the model’s applicability may vary depending on the industry being analyzed. Some industries may have more complex structures that require additional analytical tools, and some may have unique factors that the model does not account for.
Overall, while the Porter Generic Model is a valuable tool for analyzing competition in an industry, it should be used in conjunction with other analytical tools and should be adapted to account for the unique factors of the industry being analyzed.