Strategy - my take on Porter II

Porter 5 forces model for analysis of 'industry', as I mentioned in the previous post has been widely acclaimed and acknowledged, though there are some gaps which make the model less than good for all purposes of application.

Firstly, Porter fails to mention what constitutes an industry. This definition of industry can however can be adopted quite well from the concept of 'strategic groups'.

Secondly, as Porter mentions about the threat of substitutes, he fails to objectively provide any framework for assessing the 'extent of substitution' to be considered. Also, though Porter gets into depth of determining importance to be assigned to substitutes based on price-performance levels, he fails to capture the dynamicity of 'substitute products' i.e. a distant substitute of today can be a more direct threat in the future and vica versa.

Thirdly, entire Porter's model fails to consider the 5 forces from a constantly changing level. A 'scenario planning' tool used by Royal Dutch Shell is the only currently widely accepted tool for aid in developing strategies based on future possible scenarios.

Fourthly, Porter's model tends to serve only at the 'firm' level ( to be more precise..for individual product / specific product business unit) but is not replicable at the Corporate level. This limits its use for most of the companies in today's world as they are in more than products.

Last but not the least, though Porter's 5 forces model takes encapsulates 'substitutes', on prima facie atleast, there is no mention of 'alternatives' which pose a significant big threat compared to substitutes. An 'alternate' as I define, is an outright change/ vanishing of a particular need of the consumer, either voluntary or not. A complete ban by the government on the tobacco products / liquor products would be a case on involuntary alternative of 'no tobacco/ liquor'. Also, the evolution of alternates creates markets for new and innovative products.

PS - I know its kind of boring to have 3 posts on the subject of strategy...no more strategy now...porter ki kasaam