The Five Forces of Industry Competitive Advantage

This section provides an update to Porter's five forces model to account for the effect of technology on strategic management. Thoroughly read the material for this section, then exercises at the end of the section. How would you apply Porter's five forces model in the world today?

Key Framework: The Five Forces of Industry Competitive Advantage

Questions and Exercises

  1. What are Porter's "five forces"?
  2. Use the five forces model to illustrate competition in the newspaper industry. Are some competitors better positioned to withstand this environment than others? Why or why not? What role do technology and resources for competitive advantage play in shaping industry competition?
  3. What is price transparency? What is information asymmetry? How does the Internet relate to these two concepts? How does the Internet shift bargaining power among the five forces?
  4. How has the rise of the Internet impacted each of the five forces for music retailers?
  5. In what ways is the online music buying experience superior to that of buying in stores?
  6. What is the substitute for music CDs? What is the comparative sound quality of the substitute? Why would a listener accept an inferior product?
  7. Based on Porter's five forces, is this a good time to enter the retail music industry? Why or why not?
  8. What is the cost to the music industry of music theft? Cite your source.
  9. Discuss the concepts of price transparency and information asymmetry as they apply to the diamond industry as a result of the entry of BlueNile. Name another industry where the Internet has had a similar impact.
  10. Under what conditions can the Internet strengthen supplier bargaining power? Give an example.
  11. What is the effect of switching costs on buyer bargaining power? Give an example.
  12. How does the Internet impact bargaining power for providers of rare or highly differentiated goods? Why?