As I have been working on this today I thought I would write a quick post on the common mistakes when conducting Porter’s five forces analysis:
- Defining the industry too narrowly or broadly
- Making lists instead of conducting rigorous analysis
- Declaring an industry attractive or not instead of using the tool to inform strategy
- Spending time equally on all the forces instead of the important ones
- Confusing cause and effect
The one that I find very hard is defining the industry for example take BMW are they in the car market, luxury car market, Europe, USA or Asia? In the end it is probably best to conduct multiple analyses for each large segment where the product competes.