An Evaluation of Porter’s Five Forces Model

It is important for industry managers, economists, financial analysts and investors as well as others to be able to get a basic understanding of an industry or the market within which it operates. Such an understanding assists individuals to understand the nature of competition and to formulate strategy as well as to determine if it is worth investing in an industry. Whereas many models which attempt to explain an industry and its market environment have been presented by various authors, Michael Porter’s Five Forces Model is one of the most widely accepted models for a fundamental analysis of an industry and the competition in its market. This essay presents an explanation of Michael Porter’s Five Forces Model and examines some of the model’s limitations.