The Internet undermines the premises of competitive analysis. Porter’s “five forces” framework presumed that the definitions of the firm, industry, suppliers, customers, and new entrants were given and obvious. But the Internet destroys these neat categories. The definition of the business, competitors, suppliers, etc. is now the essence of the question, not a premise of the answer. Compound this with the well-known prevalence of increasing returns when businesses are defined by information systems, intellectual assets, or networks, and the whole logic of microeconomic Optimization crumbles. In this environment, fine tuning gives way to big bets. Resources become chips to be shuffled and deployed; planning becomes gambling; winner takes all. Poker replaces Pareto as the paradigm of competition.
Sources: Boston Consulting Group (BCG), Journal of Business Strategy
Subject: Strategy
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