Six Forces Model

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The Six Forces Model is a market opportunities analysis model, as an extension to Porter's Five Forces Model and is more robust than a standard SWOT analysis.

The following forces are identified:

Competition
New entrants
End users/Buyers
Suppliers
Substitutes
Complementary products/ The government/ The public

There is no rationale in crowding unrelated forces together. Complementors, regulators, media, distributors, decision makers, non-government organizations etc. are just a few examples illustrating the obsolescence of Porter's model. Although Porter argues a significant role for complements, so far he has not recognized it as being the sixth force. Contrary to the introduction, Porter's model is not "more robust than a standard SWOT analysis". It elaborates on the Threats component of SWOT. The model's architecture is sloppy: why distinguish between Competitors and New Entrants (incumbent vs. new) and not mention specifically new customers, new users/buyers, new suppliers (offshoring etc.) or new substitutes?

[edit] Criticisms of the 5 Force model

Porter's framework has repeatedly been challenged by other academics and strategists such as Stewart Neill, also the likes of Kevin P. Coyne and Somu Subramaniam have stated that three dubious assumptions underlie the five forces:

That buyers, competitors, and suppliers are unrelated and do not interact and collude
That the source of value is structural advantage (creating barriers to entry)
That uncertainty is low, allowing participants in a market to plan for and respond to competitive behavior.

An important extension to Porter was found in the work of Brandenburger and Nalebuff in the mid-1990s. Using game theory, they added the concept of complementors (also called "the 6th force"), helping to explain the reasoning behind strategic alliances. The idea that complementors are the sixth force has often been credited to Andrew Grove, former CEO of Intel Corporation. According to most references, the sixth force is government or the public. Martyn Richard Jones, whilst consulting at Groupe Bull, developed an augmented 5 forces model in Scotland in 1993, it is based on Porter's model, and includes Government (national and regional) as well as Pressure Groups as the notional 6th force. This model was the result of work was carried out as part of Group Bull's Knowledge Asset Management Organisation initiative.

It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the resources a firm brings to that industry. It is thus argued that this theory be coupled with the Resource-Based View (RBV) in order for the firm to develop a much more sound strategy.

[edit] See also

[edit] References

Andrew S. Grove, Only the Paranoid Survive: How to Exploit the Crisis Point That Challenge Every Company and Career, 1996
Nalebuff and Brandenburger, Co-opetition, 1995