Chen JCH, Chong PP, Chen YS "Decision criteria consolidation: A theoretical foundation of Pareto Principle to Porter's Competitive Forces" JOURNAL OF ORGANIZATIONAL COMPUTING AND ELECTRONIC COMMERCE11 (1): 1-14 2001

[Eugene Garfield]

JCH C hen : chen at gonzaga.edu


Title    Decision criteria consolidation: A theoretical foundation of
           Pareto Principle to Porter's Competitive Forces
Author     Chen JCH, Chong PP, Chen YS
Journal    JOURNAL OF ORGANIZATIONAL COMPUTING AND ELECTRONIC COMMERCE
           11 (1): 1-14 2001

 Document type: Article   Language: English
Cited References: 15     Times Cited: 0


Abstract:
Also known as the 80/20 rule, the Pareto Principle separates a class of
significant few from the trivial many. With this classification, Pareto
Principle has managerial and strategic implications in many disciplines. A
recent mathematical model of the Pareto Principle identifies several
important factors that cause such separation; the most important 2 are the
probability of new entry (can be viewed as "entry barrier") and the
recentness of usage. Because the probability of new entry determines the
upper bound of the usage concentration, it is deemed to be the most
important factor. Observing that Porter's [1] five competitive forces are
all closely related to the barrier of entry, it is apparent that the
theoretical model of Pareto Principle can be used as the theoretical
foundation for Porter's Five Competitive Forces. We further argue that,
similar to what has been described in microeconomics, the barrier of entry
is the most important factor that determines the market structure-be it
monopoly or pure competition. Thus, the decision criteria in strategic
planning can be greatly simplified to its effect on the barrier of entry.
Furthermore, we suggest that the recentness of usage (i.e., a product not
recently in use may be forgotten by customers, thus reducing the probability
of its future usage), though not emphasized in Porter's theory, should also
be part of the strategy formation.

Author Keywords:
usage concentration, usage modeling, Pareto Principle, Porter's competitive
forces, market structure, entry barrier, strategy

Addresses:
Chen JCH, Gonzaga Univ, Sch Business Adm, Spokane, WA 99258 USA
Gonzaga Univ, Sch Business Adm, Spokane, WA 99258 USA
Louisiana State Univ, Dept Informat Syst & Decis Sci, Ourso Coll Business,
Baton Rouge, LA 70803 USA

Publisher:
LAWRENCE ERLBAUM ASSOC INC, MAHWAH

IDS Number:
561VQ

ISSN:
1091-9392