Porter's Five Forces In Business

The current business world has changed tremendously over the years. The business environment is very competitive and dynamic and there are many factors to take into account that have deep impacts on the industry. With the development of technology and internet, there are many ways for businesses to market their products. All the industries are expanding and getting more competitive which makes it harder for new businesses to succeed. However, there are some tools that can be used to determine the attractiveness of the industries. One of the commonly used tools is Porter’s Five Forces that was started by Michael Porter in 1979 (Brooks, 2013). According to Porter, the Five Forces are instrumental in each industry thus it contributes to the attractiveness

Besanko, D’Souza and Thiagarajan (2000) stated that Porter’s Five Forces accounts for the role of government only when they are the supplier or the buyer. However, scholars have argued that the impact of government actions on strategies is more dominant than the other five forces thus the introduction of government as the sixth force. According to Oster (1994), government actions affect the industry in different methods, some actions directly impact rivalry whereas some actions would affect profitability due to their impact on entrants, substitutes, suppliers and buyers. One of the reasons for excluding government from the five forces is due to the fact that it is not within the industry. Nonetheless, the government can act as an independent force as they are policy framers within the industries, which will influence the profitability of firms. Industry-specific regulations will impact the degree of rivalry between firms as government can alter the costs or revenues among firms. Next, government policies are usually the ones that govern the entry barriers. Industries with natural monopoly or network characteristics usually have entry restrictions to protect existing firms. As for substitutes, government can affect the rate of substitute penetration through their decisions on research and development financing. Besides these, the

IT is suggested as one of the forces for this industry due to the fact that bookings are now made electronically most of the time. It also increases customers’ choice and helps maintain good customer relationship. Government is a vital force in the travel and tourism industry as they are the ones responsible for initiating tourism destinations. The influence that government regulations have on this industry is critical as overseas marketing and funding of projects is undertaken by the government. However, government regulations can either encourage or prohibit tourism as the government can help expand the industry or discourage tourism development. Therefore, government and IT are important forces for the travel and tourism