The relevance of Michael Porter’s Five Forces Framework in the context of Amazon
In his work “How Competitive Forces Shape Strategy” (1979), Michael Porter emphasizes the
role that a company’s external environment has on its performance. According to Porter, the core of a
firm’s strategy formulation is managing competition which consists of five forces - threat of new
entrants, bargaining power of suppliers or buyers, threat of substitutes and rivalry among current
competitors. These forces together define the industry’s potential profitability. The corporate
strategist’s goal is to identify his company’s strengths and weaknesses based on the industry
environment analysis. As a result, they will be able to find the most advantageous position in the
industry, where their firm can best cope with five competitive forces or can alter their causes in its
favour (Porter, 1979).
The purpose of Porter’s model is to serve as a basis for formulating a firm’s strategy. The goal
of this essay is to examine the relevance of his framework in the context of the digital era. I will
analyze the two competition forces - threat of new entrants and bargaining power of buyers - on the
example of Amazon.
In his work “How Competitive Forces Shape Strategy” (1979), Michael Porter emphasizes the
role that a company’s external environment has on its performance. According to Porter, the core of a
firm’s strategy formulation is managing competition which consists of five forces - threat of new
entrants, bargaining power of suppliers or buyers, threat of substitutes and rivalry among current
competitors. These forces together define the industry’s potential profitability. The corporate
strategist’s goal is to identify his company’s strengths and weaknesses based on the industry
environment analysis. As a result, they will be able to find the most advantageous position in the
industry, where their firm can best cope with five competitive forces or can alter their causes in its
favour (Porter, 1979).
The purpose of Porter’s model is to serve as a basis for formulating a firm’s strategy. The goal
of this essay is to examine the relevance of his framework in the context of the digital era. I will
analyze the two competition forces - threat of new entrants and bargaining power of buyers - on the
example of Amazon.
