Porter asserted that there are five forces that determine the level of competition within the industry and are very essential in drafting a corporate strategy (Porter, pg55). According to Porter, the main concerns for a typical company are a competitive edge the company has over others thereby the level of profit margin that it stands to make. In addition, porter believed that the customers and suppliers had to be properly regulated if the organization was to realize its profits or more. The five forces were: threat of new firms entering the market, threat, as a result, of substitute products, the bargaining power of the customers, bargaining power of suppliers and intensity of competitive rivalry (Porter, pg56). The assertion has however come under heavy criticism with the chief critics reiterating that, the theory does not adequately assess the effects of electronic commerce on corporate strategic planning in the current economic environment. This paper aims to argue for the criticism.

Porter’s argument was made for an economic environment that was more predictable and static thereby making it easier to predict as opposed to today’s dynamic economic activity. It means that with the ever changing financial condition and factors it is becoming harder to predict and give a general perspective, therefore, strategizing becomes harder by Porter’s theory. Porter assumed a typical perfect market where all the players in the market were known and their products homogenous (Porter, pg70). It has however changed with the industry becoming more regulated by other players who regulate the market as much as the demand and supply.. Porter’s model of classic perfect competition thereby becomes less meaningful. Electronic commerce has also seen technological breakthroughs and other business start-ups that have changed the dynamics of the market. As opposed to Porter’s static economy, globalization and the ever growing inventions have been a common trend in today’s economy (Porter, 43). It has in turn shortened the supply chains and largely reduced the entry barriers. As a result, there is a change in the business models and although Porter’s models and the five forces may be useful to given measure it becomes less useful with the current dynamic economic environment.

Porter’s model is strongly hinged on competition and competitiveness among different players in the market (Porter, 88). These may be the firm against the customers, other competitors, or the suppliers. The stiff competition with the competitive parties means that the company is highly focused on the competition and disregards other options that are equally profitable such as strategic alliances, or electronically linking up of information systems. Porter’s model labels the company being at constant wars and competition with the other players and does not have the opportunity to strike deals with players that would reduce the cost and increase the revenue. The current economic environment is aimed at joining big competitive companies or other groups in the market so as to achieve their targets. Porter’s models are therefore utterly meaningless in this regard as they cannot help in drafting strategies that are aimed at helping such deals that are n most cases the cornerstone or strength of companies.

It is important to note that the model is in most cases more appropriate to the simple market structures. The model and the five forces are more applicable to monopoly, perfect competition and other simple market structures that are not complicated in their transactions and the player involved (Porter, 93). It is more difficult to use the model in a case where there are complicated industries with many interrelations, products other by-products or segments. For instance in the case of multinational companies that have to abide to different laws and regulation through different countries while at the same time satisfying their customers. The corporate strategies needed by such companies cannot be structured using Porter’s model as it does not cover the global market and its challenges.

The industry dynamics and business models may have changed in recent years with the Information Technology changing from a tool of implementing change to the important tool for change. However, Porter’s model is in no way obsolete as the idea of a business operates in an environment of customers, suppliers, competitors and new entrants into the market are still valid. Competitiveness has also not changed as the companies still have to remain competitive and ensure that its products and services are sold by offering better services and goods to compete. The competition from other companies is still stiff and the suppliers still have to bargain for the best prices for their products. In regard to online content there are still buyers and sellers of products and the same is with the competition offered to the dealers and therefore Porter’s model still applies to a given degree. Porter’s model are therefore, highly viable in the current economic conditions.

In conclusion although there are changes in dynamics and other players in the business Porter’s model is still valid. However, with the type of businesses and business agreements companies are entering into in the current economy the five forces are not applicable. The increased use of IT in the market and also sophistication of the business have also rendered the forces less meaningful in current economic conditions.

Works Cited

Porter, Michael E.. Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press, 2000. Print.