Tony Grundy:substitutes, thereby encouraging them in a similar fashion.
� Between ‘entry barriers’ and ‘bargaining power of suppliers’: new entrants may seek to enter the market by backward integra- tion, either by acquiring suppliers or via alliances.
� Between ‘substitutes’ and ‘bargaining power of suppliers’: suppliers may seek to leap- frog over existing industry competitors by marketing and selling substitutes.
The refined model in Figure 4 thus illustrates the extent to which each of Porter’s five forces needs to be understood as a wider, interacting system as in ‘systems thinking’ rather than as a self-contained unit. Whilst Porter’s original concept explains some of these system inter- dependencies, these are underdeveloped and implicit. Indeed, the conventional input– output industry boundaries model, which appears to have been the starting point for the five forces, can be put to one side. Indeed, some new and quite interesting opportunities can be developed.
The five forces do need to be prioritized. Porter’s teaching methodology (as per his Harvard Business School video cases) involves ticking each force for whether it is favourable, neutral or unfavourable. The scores are:
√ √ √ Favourable √ √ Neutral √ Unfavourable
Unfortunately, because of the original compo- sition of the model, it is defined as being mainly about negative strategic characteristics like buyer power, supplier power, rivalry and substitutes — it is quite difficult to apply the above scoring method. For instance, where buyer power is high, the model’s user is encouraged to think this is a bad thing, therefore the score is one tick, or plainly unfavourable. In many instances, especially on initial learning, the model’s scores can come out incorrectly. Porter’s model, as it is cur- rently framed, thus presents an immediate barrier to its assimilation. Furthermore, the above scoring does not take into account the relative importance and weighting of each score. Whilst two-dimensional grids can do this trade-off, the approach is still a little cum- bersome. An alternative approach is to borrow from the vector format, originally applied in force field analysis, for enablers and con- straints of organizational change. Not only does this model easily separate out whether a force is favourable or unfavourable, but the length of the arrows can also be used to illustrate its incidence or severity and its
Copyright © 2006 John Wiley & Sons, Ltd. Strategic Change, August 2006 DOI: 10.1002/jsc
ENTRY BARRIERS
BARGAINING POWER OF SUPPLIERS
RIVALRY BARGAINING POWER OF BUYERS
SUBSTITUTES
New Entrants
encouraged
Search for
substitutes
Forward integrations
Backward integration