Fathoming Porter’s ﬁve forces model in the
G.D. Karagiannopoulos, N. Georgopoulos and K. Nikolopoulos
Purpose – To investigate the impact of the internet in ‘‘traditional’’ market rules.
Design/methodology/approach – An opinion piece based on Michael Porter’s arguments for the new
Finding – Michael Porter’s arguments for the new economy provide a useful starting point in the analysis
of the environment. His arguments are based on exaggerated phenomena. Factors that determine a
sector’s proﬁtability could be enriched with the innovation that prevails in the particular sector.
Originality/value – An attempt to criticize Porter’s thoughts regarding internet and industry structure
and to enrich the Porter’s ﬁve forces model with the ‘‘power of innovation’’.
Keywords Internet, Market forces, Economics, Innovation
Paper type Viewpoint
Distinguishing between internet and non-internet, or between the so-called new economy
and the old economy is today as useless as it would have been a century ago to compare
companies with telephones to those without. By using the infrastructure of the emerging
electric and telephone networks, the manufacturers changed the US economy exactly as
today’s Silicon Valley entrepreneurs gain power by using computers and communication
infrastructure to change the international economy (Levis et al., 2002).
The internet is an extremely important new technology and it is comes as no surprise that it
has received so much attention from all market elements. If someone wants to understand
what the internet means to him and his company, he would learn a lot by reading what the
phone meant to people 100 years ago (Evans and Wurster, 2000). Although technology is
changing this does not change the way people evaluate the economic value created by
companies or the traditional rules of competition. The creation of true economic value is the
ﬁnal arbiter of business success (Porter, 2001).
This article deals with the impact of the internet on ‘‘traditional’’ market rules and the way a
company must formulate its business strategy. Answers and pitfalls of some of Porter’s
arguments regarding the internet and strategy are presented. Finally, after re-evaluating
Porter’s ﬁve forces model, the use of the ‘‘power of innovation’’ is suggested as an additional
proﬁt factor within industry.
It is very difﬁcult to determine what is going to happen in the future and to evaluate what the
real ﬁnancial situation of a company is. Every company evaluation consists of uncertainties,
assumptions, and estimations. The stock market is the reﬂection of the economy and
approximately depicts the absolute value of companies. That is why it is understandable to
look at the marketplace outcome for preliminary guidance, when something new is
VOL. 7 NO. 6 2005, pp. 66-76, Q Emerald Group Publishing Limited, ISSN 1463-6697 DOI 10.1108/14636690510628328
G.D. Karagiannopoulos is at
TREK Consulting SA, Athens,
Greece, N. Georgopoulos is at
the Department of Business
Administration, University of
Piraeus, Piraeus, Greece and K.
Nikolopoulos is at the Lancaster
Centre for Forecasting,
Department of Management
Science, Lancaster University
Management School, Lancaster,