Is Porter's five forces framework still relevant? A study of the capital/labour intensity continuum via mining and IT industries
Porter's Five Forces (P5F) framework, published in 1979, helps us to understand the attractiveness of an industry. The five competitive forces are: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products of services, and the rivalry among existing competitors. This framework has recently come under scrutiny and been called into question. To contribute to the debate, this paper investigates the relevance of Porter's framework by contrasting vastly different industries. The use cases consist of a resource-based, capital-intensive industry, the mining industry, and a knowledge-based, labor-intensive industry, the information technology industry. Drawing from research on Porter's Five Forces framework, and through an internationalization lens, the paper proposes a modified framework augmented with four additional forces. These additional forces are: the competitor's level of innovativeness, exposure to globalization, threat of digitalization, and industry exposure to de/regulation activities. These forces were added to capture the increased interconnectivity and complexity of businesses operating in the 21st century. The paper contributes to this body of knowledge by augmenting a popular framework and applying it to vital industrial sectors. The findings aim to incite researchers, managers, entrepreneurs and policymakers to go beyond the traditional five forces as a way to help monitor their business environment and enhance decision-making processes, particularly in a post-COVID-19 world.
|Keywords||Internationalization, IT industry, Mining industry, Porter's Five Forces framework, Regulation|
|Journal||Technology Innovation Management Review|
Isabelle, D, Horak, K. (Kevin), McKinnon, S. (Sarah), & Palumbo, C. (Chiara). (2020). Is Porter's five forces framework still relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6), 28–41. doi:10.22215/timreview/1366