Expanding the Model of Competitive Business Strategy for Knowledge-Based Organizations

A Brief Overview Of The Related Literature

Most fields of study have widely accepted patterns of thinking that are the exemplar upon which much research, practice, teaching, and current thinking is based. In the field of strategic management, Michael E. Porter’s model of the five competitive forces that form business strategies have been an important tool in examining industry structures and choices that organizations make in strategic appeal for nearly three decades (Porter, 1979, 2008). These competitive forces – the rivalry among competing organizations, the threat of new entrants in the field, the threat of substitute products or services, as well as the bargaining power of buyers and sellers – have been widely studied in regard to how they influence choices that companies make in their strategic position in the market and how well the choice succeeds (Grundy, 2006; Ireland, Hoskisson, & Hitt, 2008). This concept proposes that the strongest force in most industries is usually the action of competing companies. To a somewhat lesser extent the existence of products outside the usual arena sometimes leads customers to switch to substitutes, or perhaps new entrants in the industry offer an attractive alternative – both of which impact strategy. Concurrently the bargaining power of the providers of raw materials (such as suppliers, labor and expert services) and/or customers who purchase the product or service can be a potent determinant of the micro-environment threat level that is important when formulating strategic plans.