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choice of industry boundary. The market is not an
arbitrary one, it is a "strategic market": that is, one supplying a distinct customerdetermined
need to a geographically defined customer group Whether it be local,
regional, national, pan-national, the characteristic of the market will determine which of
these types of market is appropriate for a particular analysis. Thus, although the
corrugated card boar market is said to be limited to a fifty-mile radius of the producer f
reasons of transport costs in relation to an undifferentiated product, t market for video
recorders can be legitimately regarded as global. T five-force analysis boundaries
adopted must reflect these different face if the analysis is to be useful for generating
insights into possible competitive strategies.
Managers can of course redefine their "industry" by operating the five forces
themselves (e.g. developing brand names, create switching costs). In other words, by
developing and sustaining competitive advantage, the industry structure is redefined: for
example rivalry is reduced, entry becomes more difficult, and buyers have less power
and so forth.
2-4-3. Advantages of the five-force framework
The main benefit of using this technique is that it provides a structure for
management thinking about the competitive environmental force can be examined using
the check lists set out above. Some will be highly relevant to the industry and some less
relevant. Son valuable insights into the nature of the industry will usually emery from
such analysis.
It can also be useful if two or more groups of managers carry out (appraisal
independently. Differences of perceptions can then are raise and discussed, and where
agreement is reached, some confidence can placed in the judgments.
Several industry/market analyses will often be worthwhile. The firm would be
for the industry as a whole, while subsequent analyses will focus on particular
segments. A third round might consider the Industry at some defined point in the future,
in order to introduce this element into what has so far been an exercise in analyzing the
cure situation. The framework can then be productive in helping to different strategic
segment boundaries, in revealing insights about the key force( in the competitive
environment, and in identifying which forces can be transformed into advantageous
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