Strategy consultants will use Porter's Five Forces framework when making a qualitative evaluation of a firm's strategic position; however, it is only one tool of many and is not infallible. The framework is only a starting point or checklist. Like most models, Porter's Five Forces has advantages and limitations when applied to strategic planning processes; one must understand how it is designed to be used and recognize its limitations.
Single Industry vs. Multiple Industry Operation
According to Porter, the Five Forces model is best used at the broader level of an entire industry. Assessing at the smaller levels of sectors, competitive groups, or general markets will not yield strategically relevant information. Porter's factors are specifically determined based on the industry level. Large organizations analyzing markets that are too broad and smaller organizations focusing on specific sectors need to keep this limitation in mind when using this framework.
Some firms operate in only one industry, while others operate in multiple industries. A firm that competes in a single industry will realistically only need to assess the industry it is in (and perhaps other supporting industries depending upon the situation). For diversified companies, however, the first fundamental issue in corporate strategy is the selection of industries (lines of business) in which the company should focus. Following this, each line of business should develop its own industry-specific Five Forces analysis. The average Global 1,000 company competes in approximately 52 industries (lines of business). These large firms require a diversified series of analyses.
Adaptability and Evolution
Another limitation—which Porter's model shares with most competitive frameworks—is that of chronological thinking. Porters model is inherently static, representing only aspects of the present day (and perhaps those that are easily predicted within the short term). As strategic planning involves long-term objectives and the pursuit of adaptability, Porter's model is too static to be relied upon outside of short- to medium-term objectives.
It has been noted that conclusions from the Five Forces model are highly debatable. This is deliberate, as models are designed to spark discussion and underline key concerns. However, false conclusions can be reached when models are taken as certain. The purpose of the model is brainstorming: a thinking exercise to demonstrate the subjective attractiveness of a given industry landscape. It is not designed to decide optimal industries with certainty. In short, conclusions should be taken in the context of the broader strategic discussion and not as opposed to a stand-alone recommendation.