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3) How relevant is porter five forces in helping firms to sustain competitive advantage

A firm is said to sustain competitive advantage if it has achieved above industryaverage long run profitability. As it is an average, it is relative to peer performance

within the industry and the average is derived from the five forces that exist within the

industry. For instance the average in the case of pharmaceutical industry is higher

compared to airline industry because the competition is weak in former making it

more attractive than the latter. OK to here. Cautious OK to the next sentence. So to

understand the five forces, there is a need to analyse the environment and moreover

the firm should align itself with the environment (consonance-strategic fit) whichholds the key to determine the firms competitive advantage.

The external environment consists of forces outside the traditional organisational

boundary which form the context within which the organisation exists (Wheelan &

Hunger). The key environmental forces constraints the organisation ability to achieve

its aim and therefore requires a framework that systematically identifies the possible

constraints and a methodology to identify the key forces and prioritise it. According to

Porter (1990 certain of this date! ) the industry structure framework helps to rapidly

identify the structural features that determine the nature of competition in an

industry. /

Hence industry structure framework suggests five forces (threat of new entrants,

bargaining power of suppliers and buyers, rivalry among competitors, threat of

substitutes) of strategic competitive threat which determine the attractiveness of

industry. This industry structure determines strategic competitors who compete on

profit rather than products. Therefore the firms ROI is dependent on these forces and

if the competition is weak then ROI is high and vice versa. According to Porter the

strategic analysis includes

-understanding of industry structure through five forces and identifying key forces.

- identify the drivers for change like PLC or PEST

- Carry out new five forces to identify threats and opportunities. /


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So from the above discussion it can be understood that the firm should align itself

with the environment to achieve strategic fit which helps in achieving the competitive

advantage. Hence a strategy that achieves fit outweighs all other strategies. As per

Porter (1996) sustainable advantage comes from a system of activities that are

integrated and complementary to each other and these complementarities become very

difficult to copy or duplicate as the competitor has to match not only one activity but

the entire system yes . This is in resonance with Barney (1991) who stated competitive

advantage persists when the competitors are unable to neutralise or duplicate it so.

What I am getting in this paragraph is a number of ideas which have the feel of

relevance to each other and the question but I find I am having to make the

connections because you are not. This makes me think you do not understand these

points sufficiently well to make their relationship to each other coherent. In other

words, they need to be more thoroughly explained.

So one of the approaches for sustaining competitive advantage that emphasize on how

best to achieve consonance with the five forces is Porters positioning approach.

According to Porter, firms can gain competitive advantage if they follow generic

business strategies like Low cost, Differentiation or Focus. Low cost strategy mainly

focuses on efficiency which helps to invent new process which tends to lower the unit

prices. Differentiation strategy helps firm to concentrate on customer responsiveness

which drives innovation of new products rather than new processes and keeping high

prices for the product. Focus strategy is defined by the scope, whether the firm is

concentrating on wide range of customers or narrow range of target customers. A

company which pursue more than one of the above strategies is said to be stuck in the

middle and the firm earns lower than average profits. Therefore firms which makes

consistent trade offs and pursue one strategy can achieve sustainable competitive

advantage. /

The above discussion mainly focussed on analysing external environment and

achieving fit to attain sustainable competitive advantage. However as per Barney

companies like Dell, southwest airlines and Wal- mart are able to be more profitable

in their industry thought it is not attractive. yes This shows that environment is not the

only the determinant of firms profit potential yes and this can be explained byResearch Based View (RBV) no. According to RBV firms sustain competitive


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advantage due to their resources and capabilities yes . Deriving competitive advantage

f r or m resources depends on its characteristics and the organisational ability to

leverage it yes . Firms that develop distinct capabilities maintain their resources and

hence provide distinct competencies to the firm which aid in sustaining competitive

advantage . Therefore the long term strategy for any firm is to apply and develop

resources because these provide stable basis for formulation of strategy in ever

changing market. Is it, what does Porter 1996 think - I mention it because you did 2

paragraphs previously.

Another perspective of sustaining competitive advantage is through value innovation

proposed by Kim and Mauborgne which create profits by delivering superior

customer value at profitable cost. In contrast to 5 forces approach which emphasise on

strategy responding to the environment, according to this approach strategy creates

the environment for the firms to be profitable by looking outside the industry

boundaries, strategic groups and redefining buyers and identify a blue oceans instead

to compete in red oceans. Are you saying only red oceans have 5-forces and blue

oceans do not?

To conclude, to sustain competitive advantage analysing the industry environment is

needed and firms may respond by formulating the strategy based on the environment.

However, if there are intense competing firms that make industry not attractive firms

may sustain competitive advantage by RBV and value innovation approach as

discussed above. Therefore porter five forces may be relevant in helping firms sustain

competitive advantage if industry is attractive and can be used as a staring point in

other situations, but more likely not to be taken as only way to achieve sustainable

competitive advantage.

You needed to be more explicit over the relationship between the 5 forces and the

positioning view of competitive advantage. You note it, but fail to make it central and

it gets a bit lost in a rather rambling assemblage of issues and ideas. Same with your

RBV and Blue Ocean critiques. It is like you have found the right bits of the jigsaw

but you havent put them together to form the picture. I do not have a clear answer to

the question, but I have the bits which could be. You needed to be clear as to how

Porters generic strategies each achieve fit with the 5-forces. Clearly a pass, but shortof a merit. It needed a bit of time spent planning the structure of the answer.

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