Question

1. Porter’s 5 Forces is addressed in detail in Chapter 2. Discuss why it may be limited in analyzing the industry that Netflix currently competes in and what needs to be done using observations from that industry?

Answer 1

The limiting factors of Porter's 5 forces model to analyse the Netflix are:

1. Assumption of a classic market: The first limitation of the porter's 5 forces model would be the underlying the assumption of existence of a classic market. It is assumed that the buyers would have a regular power same as supplier and the competition would arrive thereby. But in Netflix we can see that no special substitutes are available to be a part of this model thus making the analysis fail.

2. Static Market Structure: The second limitation is the static market structure. This model assumes that the market structure of the organisation remians static and there is no change in the economy, but this is again not true. As we can see, Netflix has extensively rised in this month because of covid-19, thus, this wasn't mentioned with this five forces model.

3. Not taking Value chain: At last, this model also doesn't support a value chain analysis the company is providing apart from its basic services to the customers. The power of value chain of Amazon through the Amazon prime is not undertaken to make this analysis a reasonable one.

Thus, I believe that this model is a theoretical structure to have the knowledge about the competition but not the practical idea. I believe that if the changes like taking the market structure and the economy in regard and also the real market assumption of what actually is trending in the market while calculating the competition, this would help us having a better idea for Netflix under this scene.