Which of the following is a drawback of Porter's Five Forces model?

• A. It incorporates government policy as a central force.
• B. It focuses exclusively on macroeconomic factors.
• C. It does not account for the dynamic changes in industry structure over time.
• D. It provides detailed quantitative predictions about market prices.

Answer: (C)

Verified step by step guidance

1. Understand that Porter's Five Forces model is a framework used to analyze the competitive forces within an industry, focusing on factors like the threat of new entrants, bargaining power of suppliers and buyers, threat of substitutes, and industry rivalry.
2. Recognize that the model is primarily static, meaning it provides a snapshot of the industry structure at a given point in time rather than capturing how the industry evolves dynamically.
3. Note that government policy is not considered a central force in Porter's model; instead, it focuses on microeconomic competitive forces rather than macroeconomic factors or government interventions.
4. Understand that the model is qualitative rather than quantitative, so it does not provide detailed numerical predictions about market prices or outcomes.
5. Conclude that a key drawback of Porter's Five Forces is its inability to account for dynamic changes in the industry structure over time, which limits its usefulness for long-term strategic planning.