Six Forces Model
Encyclopedia
The Six Forces Model is a market opportunities analysis model, as an extension to Porter five forces analysis and is more robust than a standard SWOT analysis
.
The following forces are identified:
An important extension to Porter was found in the work of Brandenburger and Nalebuff in the mid-1990s. Using game theory
, they added the concept of complementors
(also called "the 6th force"), helping to explain the reasoning behind strategic alliance
s. The idea that complementors
are the sixth force has often been credited to Andrew Grove
, former CEO of Intel Corporation
. According to most references, the sixth force is government or the public. Martyn Richard Jones, whilst consulting at Groupe Bull
, developed an augmented 5 forces model in Scotland in 1993, it is based on Porter's model, and includes Government (national and regional) as well as Pressure Groups as the notional 6th force. This model was the result of work carried out as part of Group Bulle's Knowledge Asset Management Organisation initiative.
It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the resources a firm brings to that industry. It is thus argued that this theory be coupled with the resource-based view
(RBV) in order for the firm to develop a much more sound strategy.
SWOT analysis
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture...
.
The following forces are identified:
- Competition
- New entrants
- End users/buyers
- Suppliers
- Substitutes
- Complementary products/ the government/ the public
Criticisms of the five force model
Porter's framework has been challenged by other academics and strategists such as Stewart Neill, also the likes of Kevin P. Coyne and Somu Subramaniam have stated that three dubious assumptions underlie the five forces:- That buyers, competitors, and suppliers are unrelated and do not interact and collude
- That the source of value is structural advantage (creating barriers to entry)
- That uncertainty is low, allowing participants in a market to plan for and respond to competitive behavior.
An important extension to Porter was found in the work of Brandenburger and Nalebuff in the mid-1990s. Using game theory
Game theory
Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
, they added the concept of complementors
Complementors
Complementors is a term used to describe businesses that directly sell a product or service that complement the product or service of another company by adding value to mutual customers; for example, Intel and Microsoft , or Microsoft and McAfee .Complementors are sometimes called "The...
(also called "the 6th force"), helping to explain the reasoning behind strategic alliance
Strategic alliance
A Strategic Alliance is a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations...
s. The idea that complementors
Complementors
Complementors is a term used to describe businesses that directly sell a product or service that complement the product or service of another company by adding value to mutual customers; for example, Intel and Microsoft , or Microsoft and McAfee .Complementors are sometimes called "The...
are the sixth force has often been credited to Andrew Grove
Andrew Grove
Andrew Stephen Grove , is a Hungarian-born Jewish-American Businessman/ Engineer, Author & a science pioneer in the semiconductor industry. He escaped from Communist-controlled Hungary at the age of 20 and moved to the U.S., where he finished his education...
, former CEO of Intel Corporation
Intel Corporation
Intel Corporation is an American multinational semiconductor chip maker corporation headquartered in Santa Clara, California, United States and the world's largest semiconductor chip maker, based on revenue. It is the inventor of the x86 series of microprocessors, the processors found in most...
. According to most references, the sixth force is government or the public. Martyn Richard Jones, whilst consulting at Groupe Bull
Groupe Bull
-External links:* * — Friends, co-workers and former employees of Bull and Honeywell* *...
, developed an augmented 5 forces model in Scotland in 1993, it is based on Porter's model, and includes Government (national and regional) as well as Pressure Groups as the notional 6th force. This model was the result of work carried out as part of Group Bulle's Knowledge Asset Management Organisation initiative.
It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the resources a firm brings to that industry. It is thus argued that this theory be coupled with the resource-based view
Resource-Based View
The resource-based view is a business management tool used to determine the strategic resources available to a company. The fundamental principle of the RBV is that the basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable resources at the firm's...
(RBV) in order for the firm to develop a much more sound strategy.