Porter's 5 Forces Model Was Based on a Static, Stable

question 28

Multiple Choice

Porter's 5 Forces model was based on a static, stable view of industry which ignores dynamic forces

• A)because industries in Porter's day were not very dynamic.
• B)which can easily be dealt with by taking a dynamic perspective of the forces e.g. Innovation is a consequence of Rivalry.
• C)and so has outlived its usefulness, and should be replaced with something more up to date.
• D)which was Porter's intention, because you have to "walk before you can run".

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Definitions:

Market Risk Premium

The additional return over the risk-free rate that investors require to compensate them for the extra risk of investing in the stock market.

Fairly Priced

A term suggesting an asset is trading at a price close to its intrinsic value, considering its earnings, growth potential, and risk.

Expected Return

The predicted amount of profit or loss an investment generates based on historical or projected performance.

Risk-free Rate

The return on investment of a theoretically risk-less security, often represented by the yield on government bonds.