The Usefulness And Limitation Of Porter 's Five Forces Framework

1498 WordsDec 18, 20146 Pages
I The usefulness and limitation of Porter’s Five Forces Framework Introduction Porter’s five forces is a framework, which was developed by Michael Porter of Harvard Business School in 1979, was widely used in different industries for structural analysis and corporate strategy formulation (Wu, 2012). Porter’s five forces model is considered to be a basic idea to analyze the rules of competition in an industry and stress the important elements for the purpose of achieving a long-term competition attractiveness (Wu, 2012). The main purpose of this essay is to explain how Porter’s five forces framework for industry analysis determine the competition attractiveness of an industry through a case…show more content…
Since the first emergence of health club chains operated as a business firm in the early 1980s, the new fitness clubs equipped with advanced exercise facilities and providing instructions in a variety of activities have long been a feature of urban life in UK. Since 2000 the UK health club industry has been considerable maturing after two decades of rapid growth. Now the industry is entering a period of uncertainty and change. As one of the leading health club chain companies in the UK, Fitness First Ltd was wondering how to keep its position by taking advantage of the changes and uncertainty occurring in the industry in the future. How the competition attractiveness of Fitness First Ltd will be determined by using Porter’s five forces framework will be assessed the following (Grant, 2012). Bargaining power of suppliers The bargaining power of suppliers is determined by input such as the cost relative to total purchases in the industry, suppliers’ concentration and differentiation of suppliers’ products and so on (Porter, 1985). According to the statistics from the Times, an investment of a full service health club offered by the major health club chains is usually in excess of a million pounds, which is a large investment beyond the affordability of small fitness clubs. The leading equipment suppliers in the industry include Life Fitness (USA) and Technogym (Italy), who focus on the stable and financially strong buyers like Fitness First. Based on

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