Analysis of Five Forces Model Essay Example | Topics and Well Written Essays - 1000 words

Analysis of Five Forces Model - Essay Example The first stage refers to the small incremental changes in the market which may cause the demand pattern to change in the market. The impact on the business can be in the form of fall in revenues. The second stage refers to a situation where the change becomes more pronounced which may lead to severe financial distress for the business owners as the changes in the external environment continue to take place. The third stage refers to a situation where the firm realizes that the change in the market conditions is so severe that minor changes made by the management both at the senior and the junior level will not be adequate to solve the crisis. This is a situation which calls for the dramatic strategic shift to increase the market share and revenue of the firm. An inference that can be drawn from this model is that the strategies of a firm require constant changes because strategic drift mainly occurs when the strategies of the firm lose focus about the external conditions in the mark et. Porter’s five forces model is also referred to as the positioning school (Stonehouse and Snowdon, 2007). However, Porter’s models of competitive forces have been subject to major criticism. From an economic point of view, it has been observed by Hax and Wilde (2002) that the model of Porter assumes a perfectly competitive market which is a utopian concept. It has also been observed that Porter’s model can at best be used to analyze simple market structure because as the industry structure becomes complex with multiple interrelations then the model is not very suitable (Hax and Wilde, 2002).