The primary purpose of Porter's five forces model is that competition is often observed too narrowly

by the management, while there are always broader underlying aspects that determine profits, such as
customers and buyers (Harvard Business Review, 2008). When strategists analyze their industry
through these five forces, they can identify ways to plan and deal with them. The exploitation of this
model can help with approaching these underlying drivers and establish a specific strategy in terms of
positioning the company within a given industry to provide the best defense against the competition
and, at the same time, positively influencing the balance of the forces through strategic moves (Porter,
1979). This paper aims to decide whether this model and particularly forces of the threat of new entry
and supplier power are still applicable to new internet companies such as Uber.
One of the five forces is the threat of new entry. This force refers to the threat that new
competitors pose to current players within an industry and vice versa. The seriousness of this force
depends on two things: the barriers to entry and the expected retaliation. There are six primary sources
of barriers to entry: economies of scale, product differentiation, capital requirements, cost
disadvantages independent of size, access to the distribution channel, and government policy.
The new entrants that want to enter the taxi business and compete with Uber face few barriers
to entry. Firstly, economies of scale are not significant, while there is no need to have large psychical
resources to start this business. Secondly, product differentiation is also not a strong barrier, while the
price is the main factor for differentiation. Access to distribution channels is not strong either, because
taxi services can drive their customers to any place. The barrier to entry in terms of government policy
is not that strict either.
Another force in Porter's model is supplier power. This supplier force is powerful when it is
dominated by a few companies and is more concentrated than the industry it sells to; its product is
unique or has a high switching cost; there is a small number of alternative products, and when the
industry it sells to is not an important customer to the supply group.
In this context, the supplier power of the taxi service industry is relatively low. The only need
here is having employees and cars. Employees do not have to be skilled at all. The only thing that
needs to be fulfilled is a driver, and a taxi license, which can be easily obtained, and vehicles can be
bought or rented from any company, while there is no need for specific requirements. This indicates
that the supplier power is also low.
However, I believe that Porter's model cannot be fully applied to new internet companies such
as Uber. Porter's five forces are intended to take a look at the whole industry. While Uber has entered
an already existing industry (raid-hailing), they created an entirely new industry based only around
them, thanks to new technologies and innovation.
Although this new 'e-taxi' service competes with the existing taxi services, it has completely
new and different forces and barriers to entry than those in Porter’s work.
For example, the supplier power in this industry would be almost non-existent because drivers
do not demand a higher wage. Drivers know how much they can earn, and they can also choose what

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time they want to work. All of this is possible, while Uber does not act as an employer but rather as a
third-party service that unites drivers as freelancers. This is why Uber cannot be looked at as a
company in the industry. Technological innovation shifts these five forces into the background. All of
these forces are slowly disappearing and becoming irrelevant. This model is static and does not count
with innovation and trends (Dälken, 2014).
Furthermore, Porter's model does not guarantee that competitive advantage's sustainability
could be analyzed by applying this model. For example, standard taxi services might have thought that
instead of buying cars, they could have rented them, therefore saving on capital and gaining a
competitive advantage. On the other hand, with Uber and their no need for having any cars or drivers
on their own, this advantage was lost.
To sum up, I believe that Porter's model can be useful today, even when it is applied to new
internet companies, and it can help gain a little insight into the industry. However, managers should
not rely on this model because of the progressing innovation that this model does not consider.

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