Porter Framework vs A More Extended Framework

Abstract

Michael Porter presents a framework for defining an industry's structure to assist strategic teams in identifying the right strategy to gain a competitive advantage over rivals. This framework is based on two major axioms that determine the industry's structure. The first axiom focuses on the relationship among firms in the value chain, involving a zero-sum or distributive bargaining relationship according to Porter. The second axiom sets out that all firms in an industry are confronted with similar conditions. We defend an alternative axiom in determining the industrial structure. The assumption here is that participants in a value chain are involved in a non-zero-sum or integrative bargaining relationship. The alternative axiom that focuses more on mutual cooperation between participants in the value chain is more appropriate for the long-term prosperity of the company. It provides a better set of factors influencing a greater degree of market penetration and profits in the long run. In this paper, we add two more forces to Porter’s Framework that according to today’s business environment and context will help to create a more complete framework for analyzing the industry. We plan to use and test the framework as a basis for research in the future in order to determine the competitive advantage of businesses operating in an industry but with different means, in other words from brick-and-mortar businesses to totally virtual firms that have flourished over the past years. The modeling tools help in understanding the business potential, whereas, the value chain analysis provides help to understand where the most productive advantage is based.