I agree with the author of the article “A fresh look at industry and market analysis” that though Porter’s basic premises are valid, the Five Forces model is an incomplete representation of the factors that influence the industry currently. I believe “complementors” play a very crucial role in the current market scenario. Consider the example of Apple’s IPhone. Though IPhone has many inherent attractions and advantages, in course of time having diverse applications has become a major selling point. Contrast this with phones that run windows operating system. Microsoft is trying to catch up, by hosting conferences targeting application developers, encouraging them to create applications for windows.
The impact of changing market conditions also plays a very crucial role in shaping the companies strategies. In pre Internet era, the market conditions do not change very drastically. But with the advent of Internet, the market growth and market turbulence are very fluid factors. In the 21st generation, markets grow rapidly, creating huge potential and risks. Amazon had a solid strategy to ride on the growth in the e-commerce market, while many companies that grew up in the dotcom era fell by the way.
Market turbulence is another vital factor that needs to be considered in the 21st century. Consider the case of Borders, who didn’t see what was coming (one such instance being the delay in releasing an ereader) and were unable to adapt to the changing market conditions. Borders has filed for bankruptcy and closed many of their outlets. In contrast Barnes & Noble honed their strategy by releasing an ereader and diversifying their product offerings – they have created a kids section dedicated to games and childhood learning. They are betting on the attracting kids, in turn bringing in more parents and thus increasing the retail spending.
However, I find the statement “Only a few firms that pioneered a new product concept are still market leaders by the time late majority buyers have entered the market.” difficult to interpret, I understand the logical reasoning behind this, but does it make sense to hold back investments in creating innovative products. Would this not stifle innovation and send out the wrong signals? These are tough questions facing the strategy team and the CEO.
A fresh look at industry and market analysis by Stanley F.Slater & Eric M.Olson