raditionally, external analysis of groups of actors has focused on a certain type of eco-system – the “Industry”, and analysis of it through Porter’s five forces.
Porter’s five forces as a model has eroded as studies proved industry was not the primary determinant for profitability, and as the fiercest competition in dynamic markets has started coming from peripheral companies, substitutes, and start-ups rather than from existing industry competitors (Nell 2011).
In six different studies aggregated by Nell (2011), the variance in firms’ returns on assets was on average explained 11% by industry effects, 35% from firm effects, with 51% remaining unexplained.
Porter’s five forces analysis is often applied to an industry at large, rather than to a stage in a value chain. For each stage in a value chain there are different forces, and thus it rarely makes sense to make only a single analysis for a company that spans, or is impacted strategically by multiple chains, and/or industries.