Question

Topic: Student Questions

Porter's 5 Forces Vs. Pest Analysis

Posted by Anonymous on 11/9/2009 at 12:07 AM ET 250 Points
Both Porter's 5 forces & PEST Analysis look at the impact of external forces on a company? Both can be applied when a company is thinking of entering a new market? But how do you decide that for a certain situation a porter's 5 forces tool is better equipped than PEST or vice versa?
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  • Posted by Gary Bloomer on 11/9/2009 at 9:47 AM Accepted
    Dear shankha_c,

    How do you decide between Porter and PEST?

    Well, why not turn this on its head and ask yourself
    "Do I have to apply someone else's rules to my problem?"

    The overwhelming majority of consumers have never heard of Porter and have no interest in PEST, so why not create your OWN method of calculating results?

    Yes, this opinion will probably start a firestorm in the academic world. You know what? Tough.

    When you're entering any kind of new market—either with a new product in an existing market, or with an existing product that you're taking into a new market, isn't all that really matters the possibility of viability?

    Go more than one step in either direction, or worse, flip the variables and whoops, you might be heading down a slippery slope.

    Taking a new product into new market brings with it higher potential returns, yes. but it also brings with it higher risk and possibly greater loss.

    Pushing a similar product into a market that's already awash with look-alikes brings less to differentiate it from every other product, so again, there's the risk of becoming invisible.

    But when you're FIRST into a market, either with a new thing or into an existing market that's not seen your thing before, suddenly, you gain greater significance and your thingy, stands out more.

    Sure, there are big questions with this argument: Will the new thing in the old market float? Will the existing thing in the new market sink? Does whatever the new thing is fill a gap or salve a pain (real or imagined)? Or does it create a new solution to a previously unmet need, thereby CREATING a new niche?

    Think restless leg syndrome, cell phones, erectile dysfunction, and MP3 players.

    But up until ten years ago few if any of these things existed or were common place. Now, there are dozens of options and formats for all of them.

    Naturally, I could be wrong and no doubt there will be no shortage of objections to my point of view. But objections to my thinking don't answer (or at least, address) your question, do they?

    I hope this helps.

    Gary Bloomer
    Wilmington, DE, USA




  • Posted on 11/11/2009 at 2:09 PM Author
    Dear Gary,

    Thanks for writing in with your views. But I do not see this as a case of trying to fit an existing framework to an unique problem. Both PEST & Porter's 5 forces are after all a holistic way of looking at the prospects of a company entering a new market. I may of course customize my solution within the framework but as I am following a certain approach, I ensure that I have looked at the situation from all angles.

    The reason why I wanted to compare 5 forces vs. PEST was to know if their is some established criteria that can be followed with respect to what model can be followed? Lot of research has gone on reviewing the above models but given that both have a similar purpose when do use what?

    Some background...we were doing a case study on Apple & our instructor asks us to use 5 forces analysis to understand the environment in which the company operates. But given the fact it is a technology company wouldn't a pes'T' be more appropriate? That was my query

    Any ideas?
  • Posted on 11/11/2009 at 2:33 PM Author
    Dear NoStressXpress,

    I am still a student so had fewer chances of applying a SWOT/5 Forces/PEST to a business situation but in principle I agree that a SWOT can include elements of a PEST/5 Forces making it an all in one tool
  • Posted on 11/17/2009 at 9:29 PM Member
    "But when you're FIRST ...

    ...

    Think restless leg syndrome, cell phones, erectile dysfunction, and MP3 players."

    Gary's thoughts and analysis seems to me is razor sharp.

    Don't have much study of 5 forces and PEST. But if I have more knowledge of either and have a proven case of success of applying it, I would intend to hone in on that guy for now until more resources becomes available to mastering many tools for a similar problem resolution.
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