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Porter's Five

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October 09, 2010 – Comments (6)

Anyone ever use Porter's Five Forces to examine a company's competitive advantage? I put an article out yesterday on Fool.com looking at Netflix through this model:

http://www.fool.com/investing/general/2010/10/08/this-stock-has-the-edge.aspx?source=ihpsitota0000001&lidx=6

I like the model...it can simplify the first look and raise new questions going forward. There is also the value net model which looks more from the perspective of complementors and substitutes, but I find Porter's to be more helpful. Anyone out there use anything else that they find worthwhile?

Fool on!

Jason

6 Comments – Post Your Own

#1) On October 09, 2010 at 11:19 AM, gwramseyfund (57.72) wrote:

Porters 5 can only be properly used to analyze an industry.

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#2) On October 09, 2010 at 1:06 PM, TMFJMo (70.68) wrote:

While I agree with you that it is useful for a company in staking out their advantage in an industry, to consider Porter's Five in the context of only the industry is closed-minded. That tells me nothing in regard to what company may have an advantage (if any).

Sure, I may get an idea of whether an industry is even worth investing in. But Porter's is a great way of determining which companies are in fact shaping or even changing a particular industry.

 

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#3) On October 09, 2010 at 2:20 PM, Dobbes (< 20) wrote:

Porter's, SWOT, and other perceptual maps are good in business analysis in the context that they give you starting points.  The real value though is not in the framework, but the research that follows it.  So, you could use Porter's 5 forces, or you could just as easily incidentally cover the same material in the course of your normal due diligence. 

Porter likes to identify concepts that are already common, slap a label on them, and present them as original ideas.  Corporate Social Responsibility! Competitive Advantage of Nations! Value Chain Framework!  I guess someone had to do it eventually and he more or less is regarded for it.

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#4) On October 09, 2010 at 5:00 PM, TMFJMo (70.68) wrote:

Right, but you just hit the key word there: incidentally. The whole idea is the framework, a process so that you have better chances of understanding and uncovering those points in your research.

I would by no means say that Porter's is where you finish. Quite the contrary, it is an example of where you begin.

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#5) On October 09, 2010 at 10:58 PM, Dobbes (< 20) wrote:

Agree-to-agree internet hi-fives sir!

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#6) On October 10, 2010 at 8:30 PM, TMFJMo (70.68) wrote:

Yeah it struck me that it seemed like we were both ultimately saying the same thing :)

Five indeed!

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