Primary Forces

Porter's model outlines the primary forces that determine competitiveness within an industry and illustrates how those forces are related.

The model suggests that in order to develop effective organizational strategies, managers must understand and react to those external forces within an industry that determine an organization's level of competitiveness within an industry.

Limitations of the Porter's Model

The emerging era of rapid, systemic and radical change requires more flexible, systemic and dynamic  approaches to strategy formulation. Thus today, corporate strategy formulation should be a combination of different currently practiced approaches described above - judgmental designing, intuitive visioning, and emergent learning; it should be about transformation as well as perpetuation; it has to involve individual cognition and social interaction, co-operative as well as conflictive; it must include analyzing before and programming after as well as negotiating during; and all of this must be in response to what can be a demanding environment.

Traditional strategy models, such as Michael Porter's five forces model, focus on the company's external competitive environment. Most of them do not attempt to look inside the company. In contrast, the resource-based perspective highlights the need for a fit between the external market context in which a company operates and its internal capabilities.

In contrast to the Input / Output Model (I/O model), the resource-based view is grounded in the perspective that a firm's internal environment, in terms of its resources and capabilities, is more critical to the determination of strategic action than is the external environment.