The model definitely makes sense in my opinion for mulitple reasons. Well first of all I do believe that for analysis of any kind one needs to come up with a systematic approach. Parameters and guidelines that you are going to be judging an industry have to be strictly defined. Well... sure that alone is not enough. If I just come up with random parameters and guidelines on how to evaluate effectiveness of space program with a key parameter being whether I am participating that's probably (most definitely) not going to be enough. Parameters and guidelines have to be chosen so that they realistically reflect the subject matter and provide a current, unbiased and effective view of key characteristics. In order to make judgements about such broad field as the industry as a whole this approach should also be flexible, artbitrary and should make sense for a broad range. Porter's 5 forces definitely fit these requirements in my humble opinion. From using Porter analysis we are supposed to be able to see whether industry is attractive from the point of view we are approaching the questions: whether we would like to invest, open a company or buy an existing one in the industry.
With all of the buzz going on around alternative energy sources and high oil prices I had little choice but to pick Oil and Gas exploration Industry to explain difficulties to enter. An obvoius one is capital requirements to enter the industry. Huge investments are needed in order to purchase drilling equipment, do required R&D, employ hundreds of workers and various other expenses (such as employing a legal squad to make sure you follow massive regulations and trade agreements). Competition in the industry is high and offshore drilling companies are a big threat to US drilling industry. Supply is limited and new sources of oil are much harder to find and require new technologies (once again huge R&D costs). The industry is very hard to enter. However, since demand for oil is huge and oil is vital for operation of major world economies companies that have established themselves in the industry ar reaping the benefits.
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Ah hah! Señor Lukashov! I also think that Porter's 5 forces are a good determinant of industry attractiveness, due to the fact that they provide an effective view of key characteristics of the industry. I did not consider it before, yet now that you mention it, I guess it is flexible and applicable to broad ranges of discussion.
Personally, I believe that, if there is an amazing dream that someone has to enter a certain industry, these 5 forces de Porter can act as the Devil's Advocate and tell them where to stop and think hard. Surely saves people money from wasting it on investments that won't last =).
Pon de River, Pon the Oil Tanker!
--- Karup.
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