Scope: Porter’s Five Forces analyses are intended for analyzing entire industries rather than individual companies. Nevertheless, blue chip investors can use them to focus their stock selection on companies in industries with high profit potential.
Stability: Porter’s Five Forces analyses are only applicable to industries with stable competitive dynamics.
Accuracy: Porter’s Five Forces analyses are qualitative rather than quantitative. The factors are rated as high, medium or low. Thus, these analyses provide only low granularity. Because the individual factors are not weighted, the analyses are less effective for industries in which the individual factors may not hold equal importance.