Analysis: Porter's Five Forces Model for Modern Internet Companies

This essay examines the relevance of Porter's Five Forces model as a strategic tool for modern internet companies such as Uber, Amazon, Facebook, Groupon, and eBay. While Dälken (2014) argues that the model remains useful for measuring market attractiveness and determining competitive strategies, Danemo (2018) suggests it may not be equipped to handle the complexity of the current market, particularly for online service-based companies. The essay concludes that although the model has its drawbacks and may not be perfectly suited for analyzing the external environment of internet companies due to increased competition and the need for specialized strategies, it remains a valuable tool for assessing the competitive landscape and informing strategic decision-making.

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BUSINESS MANAGEMENT AND STRATEGIC MANAGEMENT
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Porter’s five forces is an important tool which is used to study the competitiveness of a
business environment and to identify the potential profitability of the organisation and determine the
strategies which will help the company to succeed in the market. The five forces were created by
Michael Porter, who was a professor at Harvard Business School in the year 1979. Since then it has
been regarded as one of the most popular and useful business tools which are used to study the
attractiveness and profit of an industry. Porter identified five forces which could create an impact on
the business environment. The five forces are as follows. Firstly, competitive rivalry means the
strength and the number of rivals or competitors that a firm has. The intensity of the competition
determines the price and the marketing campaigns of a firm. Secondly, the threat of substitution is
another product that is found as a substitute by the customers for a product supplied by the firm
(Rajasekar & Al Raee, 2013). Thirdly, the threat of new entrants means that the position of the firm
might be affected due to the entry of any new firm in the market. This threat depends on the foothold
that the firm has over the market and the strength of the customer base. Fourthly, supplier power
means the power that the suppliers have over the buyers and the increase that they make in their
prices. This power comes when the firm has a dominance in the market and knows that the customers
have no other choice. Lastly, buyer power is the dominance that the buyers have over the supplier in
terms of the price of the product (Marler & Fisher, 2013). This happens when there are several
choices in the market for the buyers. This essay will focus on whether Porter’s five forces is still an
applicable as a strategic tool for companies such as Uber, Amazon, Facebook, Groupon and eBay.
Dälken (2014) states that porter’s five forces model is a very useful tool which is still
applicable to the scenarios of measuring market attractiveness. This tool helps to determine the
strength and weaknesses of the market and therefore is beneficial for all industries. The five forces
model becomes a relevant part of the business in today’s time as well since it helps to understand the
root cause of profitability if a business and determines the competition to a great extent. Companies
such as Uber, Groupon and others would be able to develop proper strategies depending on the
external factors of the model. On the other hand, Danemo (2018) argues that the five forces model
might not be equipped enough to understand the complex situation of the current market. This makes
it incapable to assess the market properly and form the best strategies for the business. Since
companies like Uber, eBay, and Facebook operates through online services, it is most important for
them to determine strategies which would boost the level of their services. The researches argue that
the five forces model might not be applicable for internet companies of current times.
Hence, it can be concluded that even though the five forces model is a very strategic tool which helps
several companies to form strong strategies by assessing their external environment, it also has certain
drawbacks. Due to the huge competition that has arrived in current times, it might be impossible for
the five forces model to act as the perfect tool for internet companies and to assess their complex

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environment. Therefore, with the change in time, there have been changes in the ways that the
external environment of the businesses is analysed.

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References:
Dälken, F. (2014). Are porter’s five competitive forces still applicable? a critical examination
concerning the relevance for today’s business (Bachelor's thesis, University of Twente).
Danemo, J. (2018). How is AI influencing industry competition?: An exploration of online retailing
using Porter’s Five Forces Framework.
Marler, J. H., & Fisher, S. L. (2013). An evidence-based review of e-HRM and strategic human
resource management. Human Resource Management Review, 23(1), 18-36.
Rajasekar, J., & Al Raee, M. (2013). An analysis of the telecommunication industry in the Sultanate
of Oman using Michael Porter's competitive strategy model. Competitiveness Review: An
International Business Journal, 23(3), 234-259.