Commodity fetishism

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Commodity_fetishism 

 

In the marketplace, producers and consumers perceive each other by means of the money and goods that they exchange.

In Karl Marx's critique of political economy, commodity fetishism is the perception of certain relationships (especially production and exchange) not as relationships among people, but as social relationships among things (the money and commodities exchanged in market trade). As a form of reification, commodity fetishism perceives economic value as something that arises from and resides within the commodity goods themselves, and not from the series of interpersonal relations that produce the commodity and evolve its value.

The theory of commodity fetishism is presented in the first chapter of Das Kapital (English: Capital. Critique of Political Economy) (1867), at the conclusion of the analysis of the value-form of commodities, to explain that the social organization of labor is mediated through market exchange, the buying and the selling of commodities (goods and services). Hence, in a capitalist society, social relations between people—who makes what, who works for whom, the production-time for a commodity, et cetera—are perceived as social relations among objects; depending on the social function of the exchange, objects acquire a certain form (for example, if the function is to render possible exchange, the object acquires value; if its function is one of hiring a worker, then the object becomes capital). On the market, the commodities of each individual producer appear in a depersonalized form as separate exemplars of a given type of commodity regardless of who produced them, or where, or in which specific conditions, thus obscuring the social relations of production.

Marx explained the sociological concept underlying commodity fetishism thus:

As against this, the commodity-form, and the value-relation of the products of labour within which it appears, have absolutely no connection with the physical nature of the commodity and the material relations arising out of this. It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things. In order, therefore, to find an analogy we must take flight into the misty realm of religion. There the products of the human brain appear as autonomous figures endowed with a life of their own, which enter into relations both with each other and with the human race. So it is in the world of commodities with the products of men's hands. I call this the fetishism which attaches itself to the products of labour as soon as they are produced as commodities, and is therefore inseparable from the production of commodities.

Concept of fetishism

A South African fetish figurine whose supernatural powers protect the owner and kin in the natural world (c. 1900)

 

A political poster shows gold coin as the basis of prosperity (c. 1896)

The theory of commodity fetishism (German: Warenfetischismus) originated from Karl Marx's references to fetishes and fetishism in his analyses of religious superstition, and in the criticism of the beliefs of political economists. Marx borrowed the concept of "fetishism" from The Cult of Fetish Gods (1760) by Charles de Brosses, which proposed a materialist theory of the origin of religion. Moreover, in the 1840s, the philosophic discussion of fetishism by Auguste Comte, and Ludwig Feuerbach's psychological interpretation of religion also influenced Marx's development of commodity fetishism.

Marx's first mention of fetishism appeared in 1842, in his response to a newspaper article by Karl Heinrich Hermes, which defended the Prussian state on religious grounds. Hermes agreed with the German philosopher Hegel in regarding fetishism as the crudest form of religion. Marx dismissed that argument and Hermes's definition of religion as that which elevates man "above sensuous appetites". Instead, Marx said that fetishism is "the religion of sensuous appetites", and that the fantasy of the appetites tricks the fetish worshipper into believing that an inanimate object will yield its natural character to gratify the desires of the worshipper. Therefore, the crude appetite of the fetish worshipper smashes the fetish when it ceases to be of service.

The next mention of fetishism was in the 1842 Rheinische Zeitung newspaper articles about the "Debates on the Law on Thefts of Wood", wherein Marx spoke of the Spanish fetishism of gold and the German fetishism of wood as commodities:

The savages of Cuba regarded gold as a fetish of the Spaniards. They celebrated a feast in its honour, sang in a circle around it, and then threw it into the sea. If the Cuban savages had been present at the sitting of the Rhine Province Assembly, would they not have regarded wood as the Rhinelanders' fetish? But a subsequent sitting would have taught them that the worship of animals is connected with this fetishism, and they would have thrown the hares into the sea in order to save the human beings.

In the Economic and Philosophic Manuscripts of 1844, Marx spoke of the European fetish of precious-metal money:

The nations which are still dazzled by the sensuous glitter of precious metals, and are, therefore, still fetish-worshippers of metal money, are not yet fully developed money-nations. [Note the] contrast of France and England. The extent to which the solution of theoretical riddles is the task of practice, and is effected through practice, the extent to which true practice is the condition of a real and positive theory, is shown, for example, in fetishism. The sensuous consciousness of the fetish-worshipper is different from that of the Greek, because his sensuous existence is different. The abstract enmity between sense and spirit is necessary so long as the human feeling for nature, the human sense of nature, and, therefore, also the natural sense of man, are not yet produced by man's own labour.

In the ethnological notebooks, he commented upon the archæological reportage of The Origin of Civilisation and the Primitive Condition of Man: Mental and Social conditions of Savages (1870), by John Lubbock. In the Outlines of the Critique of Political Economy (Grundrisse, 1859), he criticized the statist, anti-socialist arguments of the French economist Frédéric Bastiat; and about fetishes and fetishism Marx said:

In real history, wage labour arises out of the dissolution of slavery and serfdom—or of the decay of communal property, as with Oriental and Slavonic peoples—and, in its adequate, epoch-making form, the form which takes possession of the entire social being of labour, out of the decline and fall of the guild economy, of the system of Estates, of labour and income in kind, of industry carried on as rural subsidiary occupation, of small-scale feudal agriculture, etc. In all these real historic transitions, wage labour appears as the dissolution, the annihilation of relations in which labour was fixed on all sides, in its income, its content, its location, its scope, etc. Hence, as negation of the stability of labour and of its remuneration. The direct transition from the African's fetish to Voltaire's "Supreme Being", or from the hunting gear of a North American savage to the capital of the Bank of England, is not so absurdly contrary to history, as is the transition from Bastiat's fisherman to the wage labourer.

In A Contribution to the Critique of Political Economy (1859), Marx referred to A Discourse on the Rise, Progress, Peculiar Objects, and Importance of Political Economy (1825), by John Ramsay McCulloch, who said that "In its natural state, matter ... is always destitute of value", with which Marx concurred, saying that "this shows how high even a McCulloch stands above the fetishism of German 'thinkers' who assert that 'material', and half a dozen similar irrelevancies are elements of value".

Furthermore, in the manuscript of "Results of the Immediate Process of Production" (c. 1864), an appendix to Capital: Critique of Political Economy, Volume 1 (1867), Marx said that:

... we find in the capitalist process of production [an] indissoluble fusion of use-values in which capital subsists [as] means of production and objects defined as capital, when what we are really faced with is a definite social relationship of production. In consequence, the product embedded in this mode of production is equated with the commodity, by those who have to deal with it. It is this that forms the foundation for the fetishism of the political economists.

Hence did Karl Marx apply the concepts of fetish and fetishism, derived from economic and ethnologic studies, to the development of the theory of commodity fetishism, wherein an economic abstraction (value) is psychologically transformed (reified) into an object, which people choose to believe has an intrinsic value, in and of itself.

Theory

In the critique of political economy

Marx proposed that in a society where independent, private producers trade their products with each other, of their own volition and initiative, and without much coordination of market exchange, the volumes of production and commercial activities are adjusted in accordance with the fluctuating values of the products (goods and services) as they are bought and sold, and in accordance with the fluctuations of supply and demand. Because their social coexistence, and its meaning, is expressed through market exchange (trade and transaction), people have no other relations with each other. Therefore, social relations are continually mediated and expressed with objects (commodities and money). How the traded commodities relate will depend upon the costs of production, which are reducible to quantities of human labour, although the worker has no control over what happens to the commodities that he or she produces.

Domination of things

The concept of the intrinsic value of commodities (goods and services) determines and dominates the economic (business) relationships among people, to the extent that buyers and sellers continually adjust their beliefs (financial expectations) about the value of things—either consciously or unconsciously—to the proportionate price changes (market-value) of the commodities over which buyers and sellers believe they have no true control. That psychologic perception transforms the trading-value of a commodity into an independent entity (an object), to the degree that the social value of the goods and services appears to be a natural property of the commodity, itself. Thence objectified, the market appears as if self-regulated (by fluctuating supply and demand) because, in pursuit of profit, the consumers of the products ceased to perceive the human co-operation among capitalists that is the true engine of the market where commodities are bought and sold; such is the domination of things in the market.

Objectified value

The value of a commodity originates from the human being's intellectual and perceptual capacity to consciously (subjectively) ascribe a relative value (importance) to a commodity, the goods and services manufactured by the labour of a worker. Therefore, in the course of the economic transactions (buying and selling) that constitute market exchange, people ascribe subjective values to the commodities (goods and services), which the buyers and the sellers then perceive as objective values, the market-exchange prices that people will pay for the commodities.

Naturalisation of market behaviour

In a capitalist society, the human perception that "the market" is an independent, sentient entity, is how buyers, sellers, and producers naturalise market exchange (the human choices and decisions that constitute commerce) as a series of "natural phenomena ... that ... happen of their own accord". Such were the political-economy arguments of the economists whom Karl Marx criticized when they spoke of the "natural equilibria" of markets, as if the price (value) of a commodity were independent of the volition and initiative of the capitalist producers, buyers, and sellers of commodities.

In the 18th century, the Scottish social philosopher and political economist Adam Smith, in The Wealth of Nations (1776) proposed that the "truck, barter, and exchange" activities of the market were corresponding economic representations of human nature, that is, the buying and selling of commodities were activities intrinsic to the market, and thus are the "natural behaviour" of the market. Hence, Smith proposed that a market economy was a self-regulating entity that "naturally" tended towards economic equilibrium, wherein the relative prices (the value) of a commodity ensured that the buyers and sellers obtained what they wanted for and from their goods and services.

In the 19th century, Karl Marx contradicted the artifice of Adam Smith's "naturalisation of the market's behaviour" as a politico-ideologic apology—by and for the capitalists—which allowed human economic choices and decisions to be misrepresented as fixed "facts of life", rather than as the human actions that resulted from the will of the producers, the buyers, and the sellers of the commodities traded at market. Such "immutable economic laws" are what Capital: Critique of Political Economy (1867) revealed about the functioning of the capitalist mode of production, how goods and services (commodities) are circulated among a society; and thus explain the psychological phenomenon of commodity fetishism, which ascribes an independent, objective value and reality to a thing that has no inherent value—other than the value given to it by the producer, the seller, and the buyer of the commodity.

Masking

In a capitalist economy, a character mask (Charaktermaske) is the functional role with which a person relates and is related to in a society composed of stratified social classes, especially in relationships and market-exchange transactions; thus, in the course of buying and selling, the commodities (goods and services) usually appear other than they are, because they are masked (obscured) by the role-playing of the buyer and the seller. Moreover, because the capitalist economy of a class society is an intrinsically contradictory system, the masking of the true socio-economic character of the transaction is an integral feature of its function and operation as market exchange. In the course of business competition among themselves, buyers, sellers, and producers cannot do business (compete) without obscurity—confidentiality and secrecy—thus the necessity of the character masks that obscure true economic motive.

Central to the Marxist critique of political economy is the obscurantism of the juridical labour contract, between the worker and the capitalist, that masks the true, exploitive nature of their economic relationship—that the worker does not sell his and her labour, but that the worker sells individual labour power, the human capacity to perform work and manufacture commodities (goods and services) that yield a profit to the producer. The work contract is the mask that obscures the economic exploitation of the difference between the wages paid for the labour of the worker, and the new value created by the labour of the worker.

Marx thus established that in a capitalist society the creation of wealth is based upon "the paid and unpaid portions of labour [that] are inseparably mixed up with each other, and the nature of the whole transaction is completely masked by the intervention of a contract, and the pay received at the end of the week"; and that:

Vulgar economics actually does nothing more than to interpret, to systematize and turn into apologetics—in a doctrinaire way—the ideas of the agents who are trapped within bourgeois relations of production. So it should not surprise us that, precisely within the estranged form of appearance of economic relations in which these prima facie absurd and complete contradictions occur—and all science would be superfluous if the form of appearance of things directly coincided with their essence—that precisely here vulgar economics feels completely at home, and that these relationships appear all the more self-evident to it, the more their inner interconnection remains hidden to it, even though these relationships are comprehensible to the popular mind.

— Capital, Volume III.

Opacity of economic relations

The primary valuation of the trading-value of goods and services (commodities) is expressed as money-prices. The buyers and the sellers determine and establish the economic and financial relationships; and afterwards compare the prices in and the price trends of the market. Moreover, because of the masking of true economic motive, neither the buyer, nor the seller, nor the producer perceive and understand every human labour-activity required to deliver the commodities (goods and services), nor do they perceive the workers whose labour facilitated the purchase of commodities. The economic results of such collective human labour are expressed as the values and the prices of the commodities; the value-relations between the amount of human labour and the value of the supplied commodity.

Applications

Cultural theory

György Lukács developed Karl Marx's theory of commodity fetishism to develop reification theory

 

Thorstein Veblen proposed the conspicuous consumption of commodities as the pursuit of social prestige

Since the 19th century, when Karl Marx presented the theory of commodity fetishism, in Section 4, "The Fetishism of Commodities and the Secret thereof", of the first chapter of Capital: Critique of Political Economy (1867), the constituent concepts of the theory, and their sociologic and economic explanations, have proved intellectually fertile propositions that permit the application of the theory (interpretation, development, adaptation) to the study, examination, and analysis of other cultural aspects of the political economy of capitalism, such as:

Sublimated sexuality

The theory of sexual fetishism, which Alfred Binet presented in the essay Le fétichisme dans l'amour: la vie psychique des micro-organismes, l'intensité des images mentales, etc. (Fetishism in Love: the Psychic Life of Micro-organisms, the Intensity of Mental Images, etc., 1887), was applied to interpret commodity fetishism as types of sexually-charged economic relationships, between a person and a commodity (goods and services), as in the case of advertising, which is a commercial enterprise that ascribes human qualities (values) to a commodity, to persuade the buyer to purchase the advertised goods and services.

Social prestige

In the 19th and in the 21st centuries, Thorstein Veblen (The Theory of the Leisure Class: An Economic Study of Institutions, 1899) and Alain de Botton (Status Anxiety, 2004) respectively developed the social status (prestige) relationship between the producer of consumer goods and the aspirations to prestige of the consumer. To avoid the status anxiety of not being of or belonging to "the right social class", the consumer establishes a personal identity (social, economic, cultural) that is defined and expressed by the commodities (goods and services) that he or she buys, owns, and uses; the domination of things that communicate the "correct signals" of social prestige, of belonging.

Reification

In History and Class Consciousness (1923), György Lukács started from the theory of commodity fetishism for his development of reification (the psychological transformation of an abstraction into a concrete object) as the principal obstacle to class consciousness. About which Lukács said: "Just as the capitalist system continuously produces and reproduces itself economically on higher levels, the structure of reification progressively sinks more deeply, more fatefully, and more definitively into the consciousness of Man"—hence, commodification pervaded every conscious human activity, as the growth of capitalism commodified every sphere of human activity into a product that can be bought and sold in the market.

Industrialised culture

Commodity fetishism is theoretically central to the Frankfurt School philosophy, especially in the work of the sociologist Theodor W. Adorno, which describes how the forms of commerce invade the human psyche; how commerce casts a person into a role not of his or her making; and how commercial forces affect the development of the psyche. In the book Dialectic of Enlightenment (1944), Adorno and Max Horkheimer presented the Theory of the Culture Industry to describe how the human imagination (artistic, spiritual, intellectual activity) becomes commodified when subordinated to the "natural commercial laws" of the market.

To the consumer, the cultural goods and services sold in the market appear to offer the promise of a richly developed and creative individuality, yet the inherent commodification severely restricts and stunts the human psyche, so that the man and the woman consumer has little "time for myself", because of the continual personification of cultural roles over which he and she exercise little control. In personifying such cultural identities, the person is a passive consumer, not the active creator, of his or her life; the promised life of individualistic creativity is incompatible with the collectivist, commercial norms of bourgeois culture.

Commodity narcissism

In the study From Commodity Fetishism to Commodity Narcissism (2012) the investigators applied the Marxist theory of commodity fetishism to psychologically analyse the economic behaviour (buying and selling) of the contemporary consumer. With the concept of commodity narcissism, the psychologists Stephen Dunne and Robert Cluley proposed that consumers who claim to be ethically concerned about the manufacturing origin of commodities, nonetheless behaved as if ignorant of the exploitative labour conditions under which the workers produced the goods and services, bought by the "concerned consumer"; that, within the culture of consumerism, narcissistic men and women have established shopping (economic consumption) as a socially acceptable way to express aggression. Researchers find no evidence that a greater manufacturing base can spur economic growth, while improving government effectiveness and regulation quality are more promising for facilitating economic growth.

Social alienation

In The Society of the Spectacle (1967), Guy Debord presented the theory of "le spectacle"—the systematic conflation of advanced capitalism, the mass communications media, and a government amenable to exploiting those factors. The spectacle transforms human relations into objectified relations among images, and vice versa; the exemplar spectacle is television, the communications medium wherein people passively allow (cultural) representations of themselves to become the active agents of their beliefs. The spectacle is the form that society assumes when the Arts, the instruments of cultural production, have been commodified as commercial activities that render an aesthetic value into a commercial value (a commodity). Whereby artistic expression then is shaped by the person's ability to sell it as a commodity, that is, as artistic goods and services.

Capitalism reorganises personal consumption to conform to the commercial principles of market exchange; commodity fetishism transforms a cultural commodity into a product with an economic "life of its own" that is independent of the volition and initiative of the artist, the producer of the commodity. What Karl Marx critically anticipated in the 19th century, with "The Fetishism of Commodities and the Secret thereof", Guy Debord interpreted and developed for the 20th century—that in modern society, the psychologic intimacies of intersubjectivity and personal self-relation are commodified into discrete "experiences" that can be bought and sold. The Society of the Spectacle is the ultimate form of social alienation that occurs when a person views his or her being (self) as a commodity that can be bought and sold, because he or she regards every human relation as a (potential) business transaction.

Semiotic sign

Jean Baudrillard applied commodity fetishism to explain the subjective feelings of men and women towards consumer goods in the "realm of circulation"; that is, the cultural mystique (mystification) that advertising ascribed to the commodities (goods and services) in order to encourage the buyer to purchase the goods and services as aids to the construction of his and her cultural identity. In the book For a Critique of the Political Economy of the Sign (1972), Baudrillard developed the semiotic theory of "the Sign" (sign value) as a development of Marx's theory of commodity fetishism and of the exchange value vs. use value dichotomy of capitalism.

Intellectual property

In the 21st century, the political economy of capitalism reified the abstract objects that are information and knowledge into the tangible commodities of intellectual property, which are produced by and derived from the labours of the intellectual and the white collar workers.

Philosophic base

The economist Michael Perelman critically examined the belief systems from which arose intellectual property rights, the field of law that commodified knowledge and information. Samuel Bowles and Herbert Gintis critically reviewed the belief systems of the theory of human capital. Knowledge, as the philosophic means to a better life, is contrasted with capitalist knowledge (as commodity and capital), produced to generate income and profit. Such commodification detaches knowledge and information from the (user) person, because, as intellectual property, they are independent, economic entities.

Knowledge: authentic and counterfeit

In Postmodernism, or, the Cultural Logic of Late Capitalism (1991), the Marxist theorist Fredric Jameson linked the reification of information and knowledge to the post-modern distinction between authentic knowledge (experience) and counterfeit knowledge (vicarious experience), which usually is acquired through the mass communications media. In Critique of Commodity Aesthetics: Appearance, Sexuality and Advertising in Capitalist Society (1986), the philosopher Wolfgang Fritz Haug presents a "critique of commodity aesthetics" that examines how human needs and desires are manipulated and reshaped for commercial gain.

Financial risk management

The sociologists Frank Furedi and Ulrich Beck studied the development of commodified types of knowledge in the business culture of "risk prevention" in the management of money. The Post–World War II economic expansion (c. 1945–1973) created very much money (capital and savings), while the dominant bourgeois ideology of money favoured the risk-management philosophy of the managers of investment funds and financial assets. From such administration of investment money, manipulated to create new capital, arose the preoccupation with risk calculations, which subsequently was followed by the "economic science" of risk prevention management. In light of which, the commodification of money as "financial investment funds" allows an ordinary person to pose as a rich person, as an economic risk-taker able to risk losing money invested to the market. Hence, the fetishization of financial risk as "a sum of money" is a reification that distorts the social perception of the true nature of financial risk, as experienced by ordinary people. Moreover, the valuation of financial risk is susceptible to ideological bias; that contemporary fortunes are achieved from the insight of experts in financial management, who study the relationship between "known" and "unknown" economic factors, by which human fears about money can be manipulated and exploited.

Commodified art

The cultural critics Georg Simmel and Walter Benjamin examined and described the fetishes and fetishism of Art, by means of which "artistic" commodities are produced for sale in the market, and how commodification determines and establishes the value of the artistic commodities (goods and services) derived from legitimate Art; for example, the selling of an artist's personal effects as "artistic fetishes".

Legal traducement

In the field of law, the Soviet scholar Evgeny Pashukanis (The General Theory of Law and Marxism, 1924), the Austrian politician Karl Renner, the German political scientist Franz Leopold Neumann, the British socialist writer China Miéville, the labour-law attorney Marc Linder, and the American legal philosopher Duncan Kennedy (The Role of Law in Economic Theory: Essays on the Fetishism of Commodities, 1985) have respectively explored the applications of commodity fetishism in their contemporary legal systems, and reported that the reification of legal forms misrepresents social relations.

Criticism

The Tribune of the Uffizi (1772–1778) by Johann Zoffany depicts the commodity-fetishism metamorphosis of oil paintings into culture-industry products

The Marxist theory of commodity fetishism is criticised from multiple perspectives.

Market logic

In the book In Praise of Commercial Culture (2000), the neoclassical economist Tyler Cowen said that despite the cultural tendency to fetishes and fetishism, the human fetishization of commodities (goods and services) is an instance of anthropomorphism (ascribing personal characteristics to animals and objects) and not a philosophic feature particular to the economics of capitalism or to the collective psychology of a capitalist society. People usually can distinguish between commercial valuations (commodities) and cultural valuations (objets d'art); if not, quotidian life would be very difficult because people would be unable to agree upon the value and the valuation of an object; thus, if the market did not exist, it would have been impossible for the popular masses to have access to cultural objects.

Capitalism as religion

In the essay "Capitalism as Religion" (1921), Walter Benjamin said that whether or not people treat capitalism as a religion was a moot subject, because "One can behold in capitalism a religion, that is to say, capitalism essentially serves to satisfy the same worries, anguish, and disquiet formerly answered by so-called religion." That the religion of capitalism is manifest in four tenets:

(i) "Capitalism is a purely cultic religion, perhaps the most extreme that ever existed"

(ii) "The permanence of the cult"

(iii) "Capitalism is probably the first instance of a cult that creates guilt, not atonement"

(iv) "God must be hidden from it, and may be addressed only when guilt is at its zenith".

Commodity iconoclasm

In Portrait of a Marxist as a Young Nun, Professor Helena Sheehan said that the analogy between commodity fetishism and religion is mistaken, because people do not worship money and commodities in the spiritual sense, by attributing to them supernatural powers. Human psychological beliefs about the value-relationships inherent to commodity fetishism are not religious beliefs, and do not possess the characteristics of spiritual beliefs. The proof of this interpretation lies in the possibility of a person's being a religious believer, despite being aware of commodity fetishism, and being critical of its manifestations; toppling the Golden Calf might be integral to one's religiousness, and such iconoclasm would lead to opposing all manifestations of idolatry.

False consciousness

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/False_consciousness 

False consciousness is a term used—primarily by Marxist sociologists—to describe ways in which material, ideological, and institutional processes are said to mislead members of the proletariat and other class actors within capitalist societies, concealing the exploitation intrinsic to the social relations between classes.

Friedrich Engels (1820-1895) used the term "false consciousness" in an 1893 letter to Franz Mehring to address the scenario where a subordinate class willfully embodies the ideology of the ruling class. Engels dubs this consciousness "false" because the class is asserting itself towards goals that do not benefit it. "Consciousness", in this context, reflects a class's ability to politically identify and assert its will. The subordinate class is conscious: it plays a major role in society and can assert its will due to being sufficiently unified in ideas and action.

Later development

Marshall I. Pomer has argued that members of the proletariat disregard the true nature of class relations because of their belief in the probability or possibility of upward mobility. Such a belief or something like it is said to be required in economics with its presumption of rational agency; otherwise wage laborers would not be the conscious supporters of social relations antithetical to their own interests, violating that presumption.

Cultural hegemony

The Italian Marxist theorist Antonio Gramsci developed the concept of cultural hegemony, the process within capitalist societies by which the ruling classes create particular norms, values, and stigmas, amounting to a culture in which their continued dominance is considered beneficial.

Structuralism

During the late 1960s and 1970s, the philosophical and anthropological school of structuralism began to gain popularity among academics and public intellectuals, focusing on interpreting human culture in terms of underlying structures such as symbolic, linguistic, and ideological perspectives. Marxist philosopher Louis Althusser popularized his structuralist interpretation of false consciousness, the Ideological State Apparatus. Structuralism influenced Althusser's interpretation of false consciousness, which focuses on the institutions of the capitalist state⁠—particularly those of public education⁠—which enforce an ideological system favoring obedience, conformity and submissiveness.

Contemporary developments

Other prominent Marxist philosophers and intellectuals developed specific interpretations of the concept of false consciousness, such as Theodor Adorno and Herbert Marcuse of the Frankfurt School, Guy Debord and Raoul Vaneigem of the French situationist movement, the anti-colonialist writer Frantz Fanon, and contemporary philosopher Slavoj Žižek. Outside of the Marxist political ideology, the economist Edward S. Herman and linguist Noam Chomsky developed the propaganda model wherein information is selectively broadcast to serve the ends of a deeply centralized ownership of private media industries.

Class consciousness

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Class_consciousness 

In political theory and particularly Marxism, class consciousness is the set of beliefs that a person holds regarding their social class or economic rank in society, the structure of their class, and their class interests. According to Karl Marx, it is an awareness that is key to sparking a revolution that would "create a dictatorship of the proletariat, transforming it from a wage-earning, property-less mass into the ruling class".

Marxist theory

While German theorist Karl Marx rarely used the term "class consciousness", he did make the distinction between "class in itself", which is defined as a category of people having a common relation to the means of production; and a "class for itself", which is defined as a stratum organized in active pursuit of its own interests.

Defining a person's social class can be a determinant for their awareness of it. Marxists define classes on the basis of their relation to the means of production, especially on whether they own capital. Non-Marxist social scientists distinguish various social strata on the basis of income, occupation, or status.

Early in the 19th century, the labels "working classes" and "middle classes" were already coming into common usage: "The old hereditary aristocracy, reinforced by the new gentry who owed their success to commerce, industry, and the professions, evolved into an "upper class". Its consciousness was formed in part by public schools (in the British sense where it refers to a form of private school) and Universities. The upper class tenaciously maintained control over the political system, depriving not only the working classes but the middle classes of a voice in the political process".

Georg Lukács' History and Class Consciousness (1923)

Class consciousness, as described by Georg Lukács's famous History and Class Consciousness (1923), is opposed to any psychological conception of consciousness, which forms the basis of individual or mass psychology (see Freud or, before him, Gustave Le Bon). According to Lukács, each social class has a determined class consciousness which it can achieve. In effect, as opposed to the liberal conception of consciousness as the basis of individual freedom and of the social contract, Marxist class consciousness is not an origin, but an achievement (i.e. it must be "earned" or won). Hence, it is never assured: the proletariat's class consciousness is the result of a permanent struggle to understand the "concrete totality" of the historical process.

According to Lukács, the proletariat was the first class in history that may achieve true class consciousness because of its specific position highlighted in The Communist Manifesto as the "living negation" of capitalism. All others classes, including the bourgeoisie, are limited to a "false consciousness" which impedes them from understanding the totality of history: instead of understanding each specific moment as a portion of a supposedly deterministic historical process, they universalize it and believe it is everlasting. Hence, capitalism is not thought as a specific phase of history, but is naturalized and thought of as an eternal solidified part of history. Says Lukács, this "false consciousness", which forms ideology itself, is not a simple error as in classical philosophy, but an illusion which cannot be dispelled.

Marx described it in his theory of commodity fetishism, which Lukács completed with his concept of reification in which alienation is what follows the worker's estrangement to the world following the new life acquired by the product of his work. The dominant bourgeois ideology thus leads the individual to see the achievement of his labour take a life of its own. Furthermore, specialization is also seen as a characteristic of the ideology of modern rationalism, which creates specific and independent domains (art, politics, science and the like). Only a global perspective can point out how all these different domains interact, argues Lukács. He also points out how Immanuel Kant brought to its limit the classical opposition between the abstract form and the concrete, historical content, which is abstractly conceived as irrational and contingent. Thus, with Kant's rational system history becomes totally contingent and is thus ignored. Only with Georg Wilhelm Friedrich Hegel's dialectic can a mediation be found between the abstract form and the abstract notion of a concrete content.

Even if the bourgeois loses his individual point of view in an attempt to grasp the reality of the totality of society and of the historical process, he is condemned to a form of false consciousness. As an individual, he will always see the collective result of individual actions as a form of "objective law" to which he must submit himself (liberalism has gone so far as seeing an invisible hand in this collective results, making capitalism the best of all possible worlds). By contrast, the proletariat would be, according to Lukács, the first class in history with the possibility to achieve a true form of class consciousness, granting it knowledge of the totality of the historical process.

The proletariat takes the place of Hegel's Weltgeist ("World Spirit"), which achieves history through Volksgeist ("the spirit of the people"): the idealist conception of an abstract Spirit making history, which ends in the realm of Reason, is replaced by a materialist conception based not on mythical Spirits, but on a concrete "identical subject-object of history": the proletariat. The proletariat is both the "object" of history, created by the capitalist social formation; but it is also the "subject" of history, as it is its labour that shapes the world, and thus, knowledge of itself is also, necessarily, knowledge of the reality and of the totality of the historical process. The proletariat's class consciousness is not immediate; class consciousness must not be mistaken either with the consciousness of one's future and collective interests, opposed to personal immediate interests.

The possibility of class consciousness is given by the objective process of history, which transforms the proletariat into a commodity, hence objectifying it. Class consciousness is thus not a simple subjective act: "as consciousness here is not the consciousness of an object opposed to itself, but the object's consciousness, the act of being conscious of oneself disrupts the objectivity form of its object" (in "Reification and the Proletariat's Consciousness" §3, III "The proletariat's point of view"). In other words, instead of the bourgeois subject and its corresponding ideological concept of individual free will, the proletariat has been transformed into an object (a commodity) which, when it takes consciousness of itself, transforms the very structure of objectivity, that is of reality.

This specific role of the proletariat is a consequence of its specific position; thus, for the first time, consciousness of itself (class consciousness) is also consciousness of the totality (knowledge of the entire social and historical process). Through dialectical materialism, the proletariat understands that what the individual bourgeois conceived as "laws" akin to the laws of nature, which may be only manipulated as in René Descartes's dream, but not changed, is in fact the result of a social and historical process, which can be controlled. Furthermore, only dialectical materialism links together all specialized domains, which modern rationalism can only think as separate instead of as forming a totality.

Only the proletariat can understand that the so-called "eternal laws of economics" are in fact nothing more than the historical form taken by the social and economical process in a capitalist society. Since these "laws" are the result of the collective actions of individuals, and are thus created by society, Marx and Lukács reasoned that this necessarily meant that they could be changed. Any attempt in transforming the so-called "laws" governing capitalism into universal principles, valid in all times and places, are criticized by Lukács as a form of false consciousness.

As the "expression of the revolutionary process itself", dialectical materialism, which is the only theory with an understanding of the totality of the historical process, is the theory which may help the proletariat in its "struggle for class consciousness". Although Lukács does not contest the Marxist primacy of the economic base on the ideological superstructure (not to be mistaken with vulgar economic determinism), he considers that there is a place for autonomous struggle for class consciousness.

In order to achieve a unity of theory and praxis, theory must not only tend toward reality in an attempt to change it; reality must also tend towards theory. Otherwise, the historical process leads a life of its own, while theorists make their own little theories, desperately waiting for some kind of possible influence over the historical process. Henceforth, reality itself must tend toward the theory, making it the "expression of the revolutionary process itself". In turn, a theory which has as its goal helping the proletariat achieve class consciousness must first be an "objective theory of class consciousness". However, theory in itself is insufficient, and ultimately relies on the struggle of humankind and of the proletariat for consciousness: the "objective theory of class consciousness is only the theory of its objective possibility".

Criticism

Economist Ludwig von Mises argued that "Marx confus[ed] the notions of caste and class". Mises allowed that class consciousness and the associated class struggle were valid concepts in some circumstances where rigid social castes exist, e.g. when slavery is legal and slaves thus share a common motive for ending their disadvantaged status relative to other castes, but according to Mises "no such conflicts are present in a society in which all citizens are equal before the law. [...] No logical objection can be advanced against distinguishing various classes among the members of such a society. Any classification is logically permissible, however arbitrarily the mark of distinction may be chosen. But it is nonsensical to classify the members of a capitalistic society according to their position in the framework of the social division of labor and then to identify these classes with the castes of a status society". Murray Rothbard argued that Marx's efforts to portray the workers and capitalists as two monolithic groups was false as workers and capitalists would routinely compete within themselves, such as capitalists entrepreneurs competing amongst themselves or native workers competing with immigrant workers. Rothbard argues that if there is constant conflict between different members of the same class, then it is absurd to argue that these members have objective interests with one another against another class.

Philosopher Leszek Kołakowski argued that the "theory of class consciousness is false" and that attempts by Marxist–Leninists to advance the concept of class consciousness necessarily led to totalitarianism.

Sociologist Ernest van den Haag has argued:

One way is to say that "objectively" people have common class interests and should act according to the class struggle pattern — but that they are not always "class conscious". They suffer from "false consciousness". But this is (a) not true; nor would it (b) help much if it were.

a) There often are conflicts among objective economic interests within a Marxian class — e.g. among workers. Conflicts occur over migration, international trade, religion or race. And workers often have objective interests in common with capitalists and in conflict with the interests of other groups of workers. Class membership is no more and possibly less decisive than say race membership in determining one's political views. If you insist on the importance of race, you may persuade people to act according to their "racial interests" for a while — as the Nazis did. If you convince people that they should act according to what you tell them are your class interests, they might. The prophecy becomes self-fulfilling. But the action comes from race or class propaganda — not from race or class as objective facts.

b) Further if we assume that classes are as important as Marx thought but that people do not act accordingly, because not having read Marx, they are not class conscious – if "class consciousness" becomes independent of class membership — and if class membership is neither sufficient nor necessary to bring the expected class behaviour, then social classes become one of many groups that influence man's action on some occasions. This would be a correct theory. But the distinctive point of Marxian theory is that class membership is decisive in determining most and particularly political actions. This is patently wrong.

Indeed, it has been argued that the class interests of any class must be empirically determined by examining their actual behavior as they do not have objectively existing interests. People must assume social identities as members of a class before it becomes possible to identify what those interests are by examining their behavior and positions. For example, it has been observed that workers form attachment to the capitalist system through trade unions rather than antagonism.

Competitive altruism

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Competitive_altruism 

Competitive altruism is a possible mechanism for the persistence of cooperative behaviors, specifically those that are performed unconditionally. The theory of reciprocal altruism can be used to explain behaviors that are performed by a donor who receives some sort of benefit in the future. When no such compensation is received, however, reciprocity fails to explain altruistic behavior.

Characteristics

To explain competitive altruism, Roberts uses the example of preening among birds. Because certain birds cannot reach parasites on all parts of their bodies, particularly their necks, they benefit from preening one another. For any given bird, there is an entire flock of potential preeners, who compete in hopes of establishing a beneficial relationship. Cheaters, or those birds that try to be preened without preening others, do not compete and thus are excluded from these relationships. Their fitness is lowered because they are ostracized by members of the flock.

McNamara et al. quantitatively analyzed this theory. Like Robert Axelrod, they created a computer program to simulate repeated interactions among individuals. The program involved players with two genetically determined traits, a ‘cooperative trait’ and a ‘choosiness trait.’ They found the following results:

‘Paradoxical’ trait combinations yield particularly low payoffs: individuals with low choosiness but high effort tend to get exploited by their co-players; individuals with high choosiness but low effort waste their time searching for better co-players, which are, however, unlikely to accept them. The positive correlation between choosiness and cooperativeness leads to a positive assortment between cooperative types – an essential feature of all mechanisms that promote cooperation.

The development of such cooperation requires variation in the degree of cooperation and choosiness, which the researchers attributed to genetic mutation and variation. McNamara et al. also determined that since a period of searching is required for ‘mutually acceptable’ players to find one another, competitive altruism is more likely to arise in animals with long life spans.

The prisoner's dilemma

To relate this condition to the prisoner's dilemma, an individual may benefit the most in a one-time interaction with another by defecting (i.e. receiving benefits without incurring any cost to itself). However, in an iterated prisoner's dilemma, where individuals interact more than once, if the act of defecting makes the individual less likely to attract a fit mate in the future, then cooperative behavior will be selected for.

This selection for cooperation is even stronger if an individual's action in an interaction is observed by third-party individuals, for the possibility of forming a reputation arises. Amotz Zahavi, famous for his work with the altruistic Arabian babbler, suggests that this level of "social prestige" will affect which individuals interact with one another and how they behave.

Competitive altruism has been demonstrated repeatedly in studies with humans. For instance, individuals are more generous when their behaviour is visible to others and altruistic individuals receive more social status and are selectively preferred as collaboration partners and group leaders. Adding insights from sexual selection theory research has also found that men behave more altruistically in the presence of an (attractive) female and altruistic males are selectively preferred as long-term sexual partners.

The handicap principle

The theory of competitive altruism also helps one connect such behavior to the handicap principle. With competitive altruism, cooperation is considered a trait that provides a signaling benefit, and thus is subject to sexual selection. Like a peacock's tail, cooperation persists and is magnified, even though it carries a cost to the individual. Cooperation must be significantly costly to the individual, such that only a limited proportion of the population is fit enough to partake.

Roberts builds on the idea of altruism as a signaling benefit with his "free gift theory". Because the recipient gains some benefit from the interaction with the donor, there is an incentive to pay attention to the signal. For example, some male birds will offer food to a potential mate. Such behavior, called courtship feeding, not only benefits the female, who receives a meal without expending any energy, but also conveys the ability of the male to forage. Consequently, the signal is kept true (i.e. it remains a correct reflection on the fitness of the mate).

However, the connection between competitive altruism and signaling is not without criticism. Wright raises the point that an altruistic signaling behavior like gift giving would cause a "flow of fitness from the higher quality individual to the lower quality one" and reduce the veracity of the signal. To account for this likely trend, Wright stipulates that the altruistic behavior must be directed at a mate or ally. In order for the theory to hold true, the signaling benefit would have to be shown to improve the individual's fitness beyond the benefit gained from the "investment" in the partner.

Coopetition

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Coopetition 

Coopetition or co-opetition (sometimes spelled "coopertition" or "co-opertition") is a neologism coined to describe cooperative competition. Coopetition is a portmanteau of cooperation and competition. Basic principles of co-opetitive structures have been described in game theory, a scientific field that received more attention with the book Theory of Games and Economic Behavior in 1944 and the works of John Forbes Nash on non-cooperative games. Coopetition occurs both at inter-organizational or intra-organizational levels.

Overview

The concept and term coopetition and its variants have been re-coined several times in history.

The concept appeared as early as 1913, being used to describe the relationships among proximate independent dealers of the Sealshipt Oyster System, who were instructed to cooperate for the benefit of the system while competing with each other for customers in the same city.

Inter-organizational

The term and the ideas around co-opetition gained wide attention within the business community after the publication in 1996 of the book by Brandenberger and Nalebuff bearing the same title. Until today this remains the reference work for both researchers and practitioners alike.

Giovanni Battista Dagnino and Giovanna Padula's conceptualized in their conference paper (2002) that, at inter-organisational level, coopetition occurs when companies interact with partial congruence of interests. They cooperate with each other to reach a higher value creation if compared to the value created without interaction and struggle to achieve competitive advantage.

Often coopetition takes place when companies that are in the same market work together in the exploration of knowledge and research of new products, at the same time that they compete for market-share of their products and in the exploitation of the knowledge created. In this case, the interactions occur simultaneously and in different levels in the value chain. This is the case in the arrangement between PSA Peugeot Citroën and Toyota to share components for a new city car—simultaneously sold as the Peugeot 107, the Toyota Aygo, and the Citroën C1, where companies save money on shared costs while remaining fiercely competitive in other areas.

Several advantages can be foreseen, as cost reductions, resources complementarity and technological transfer. Some difficulties also exist, as distribution of control, equity in risk, complementary needs and trust.

It is possible for more than two companies to be involved in coopetition with one another. Another possible case for coopetition is joint resource management in construction. Sadegh Asgari and his colleagues (2013) present a short-term partnering case in which construction contractors form an alliance, agreeing to put all or some of their resources in a joint pool for a fixed duration of time and to allocate the group resources using a more cost-effective plan.

Marcello Mariani (2007) examined that in practice policy makers and regulators can trigger, promote, and affect coopetitive interactions among economic actors that did not intentionally plan to coopete before the external institutional stakeholders (i.e., a policy maker or regulator) created the conditions for the emergence of coopetititon.

Sadegh Asgari, Abbas Afshar and Kaveh Madani (2013) suggested cooperative game theory as the basis for fair and efficient allocation of the incremental benefits of cooperation among the cooperating contractors. Their study introduced a new paradigm in construction resource planning and allocation. Contractors no longer see each other as just competitors; they look for cooperation beyond their competition in order to reduce their costs.

Intra-organizational

At the intra-organizational level, coopetition occurs between individuals or functional units within the same organization. Based on game theory and social interdependence theories, some studies investigate the presence of simultaneous cooperation and competition among functional units, the antecedents of coopetition, and its impact on knowledge sharing behaviors. For example, the concept of coopetitive knowledge sharing is developed to explain mechanisms through which coopetition influences effective knowledge sharing practices in cross-functional teams. The underlying argument is that while organizational teams need to cooperate, they are likely to experience tension caused by diverse professional philosophies and competing goals from different cross-functional representatives.

Examples

In 1913 by the Sealshipt Oyster System  In 1937 by Rockwell D. Hunt

Around 1975 by Doug Chamberlin in a class at Adrian College, responding to an instructor's request for an appropriate new word with which to refer to "conflict over how to divide up the benefits produced by cooperation". Incorporated in 1981 college textbook Thinking About Politics: American Government in Associational Perspective (N.Y: D. Van Nostrand, 1981), chapter 9, p. 257.

In the decade of the 1980s, V. Frank Asaro wrote and circulated his 314-page non-fiction work Between Order and Chaos is Coopetition, aka Balance Between Order and Chaos, which culminated in a letter from best-selling author Spencer Johnson dated February 9, 1990, urging its publication. This resulted in the later publication of Universal Co-opetition; The Tortoise Shell Game, a novelization of co-opetition; and the non-fiction A Primal Wisdom (2014), corollary to the novel. (2nd. Ed., Finalist 2015 USA Best Book Awards for nonfiction and philosophy.)

Around 1992 by Raymond Noorda to characterize Novell's business strategy.

In 1995, Daniel Ervin, CEO of Phoenix Fire Inc., which is an international business development agency that focuses on building business partner channels for technology companies, started using the word Coopertition to describe the approach of creating a partnership between two or more competing software vendors. This type of partnership enables vendors with nominal overlap in their solution portfolio to quickly gain more market share together than when they are operating apart.

In 2000, FIRST Robotics had a competition game titled Co-Opertition FIRST. In 2009, FIRST cofounder Dean Kamen received a patent titled "Method for Creating Coopertition" (spelled as one word, with no hyphen), which involves giving FIRST Robotics teams some points scored by other teams, to encourage cooperation even as they compete. US FIRST now claims a trademark on the term on its Web site.

In the mid-2000s, "coopetition" began to be used by Darrell Waltrip to describe the phenomenon of drivers cooperating at various phases of a race at "high speed" tracks such as Daytona and Talladaga where cooperative aerodynamic drafting is critical to a driver's ability to advance through the field. The ultimate goal for each driver, however, is to use the strategy to win.

One of the examples of coopetition in practice in high technology context is the collaborative joint venture formed by Samsung Electronics and Sony formed in 2004 for the development and manufacturing of flat-screen LCD Panels. Coopetition is becoming more critical in high technology contexts because of several challenges such as shrinking product life cycles, need for heavy investments in research and development, convergence of multiple technologies, and importance of technological standards. While it is quite challenging to engage in coopetition (or cooperate with a competitor), coopetition engagements are helpful for firms to address major technological challenges, to create benefits for partnering firms, and to advance technological innovations that benefit the firms, the industry, and consumers.

In 2009, the importance of coopetition was emphasized for Small and Medium-Sized Enterprises (SMEs). As technological battles intensify and technologies become more complex, SMEs face numerous challenges such as rising R&D costs, high risk and uncertainty in technological development, and lack of resources to pursue large-scale innovation projects. SMEs can more effectively deal with these problems if they work together by combining their own resources and expertise and develop their collective ability so that they can compete effectively with large firms and advance technologies they may not be able to advance alone.

In 2012 and 2013, the concept of 'Coopetitive Knowledge Sharing' was inspired by inter-organization research literature toward developing a Coopetitive Model of Knowledge Sharing that explains (1) how coopetition should be conceptualized, (2) What forms coopetition (three formative constructs of outcome (goal, reward), means (task related), boundary (friendship, geographical closeness, sense of team belonging) interdependencies), and (3) How coopetition and its interrelated components interact and influence knowledge sharing behaviors in cross-functional software teams. This series of publications in the Journal of Systems and Software and Information Processing & Management conceptualize and operationalize the multi-dimensional construct of cross-functional coopetition, and present an instrument for measuring this construct. Cross-functional coopetition is conceptualized with five distinct and independent constructs, three of them are related to cross-functional cooperation (task orientation, communication, interpersonal relationships), and two are associated with cross-functional competition (tangible resources and intangible resources).

In 2013 Compassion Games International, an activity of the Charter for Compassion, used "coopetition" to describe their annual games between cities about who can commit the most acts of kindness and compassion.

In 2014 the Caring Citizens' Congress, an Empathy Surplus Project, used "coopetition" to describe how to create "compassion primaries," where candidates for party office try to find allies in the other parties to cooperate around advancing freedom, compassion and human rights as governing principles.

Porter's five forces analysis

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis 

 

A graphical representation of Porter's five forces

Porter's Five Forces Framework is a method for analyzing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack thereof) of an industry in terms of its profitability. An "unattractive" industry is one in which the effect of these five forces reduces overall profitability. The most unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit levels. The five-forces perspective is associated with its originator, Michael E. Porter of Harvard University. This framework was first published in Harvard Business Review in 1979.

Porter refers to these forces as the microenvironment, to contrast it with the more general term macroenvironment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low because the industry's underlying structure of high fixed costs and low variable costs afford enormous latitude in the price of airline travel. Airlines tend to compete on cost, and that drives down the profitability of individual carriers as well as the industry itself because it simplifies the decision by a customer to buy or not buy a ticket. A few carriers – Richard Branson's Virgin Atlantic is one – have tried, with limited success, to use sources of differentiation in order to increase profitability.

Porter's five forces include three forces from 'horizontal' competition – the threat of substitute products or services, the threat of established rivals, and the threat of new entrants – and two others from 'vertical' competition – the bargaining power of suppliers and the bargaining power of customers.

Porter developed his five forces framework in reaction to the then-popular SWOT analysis, which he found both lacking in rigor and ad hoc. Porter's five-forces framework is based on the structure–conduct–performance paradigm in industrial organizational economics. Other Porter strategy tools include the value chain and generic competitive strategies.

Five Forces

Threat of new entrants

Profitable industries that yield high returns will attract new entities. New entrants eventually will decrease profitability for other firms in the industry. Unless the entry of new firms can be made more difficult by incumbents, abnormal profitability will fall towards zero (perfect competition), which is the minimum level of profitability required to keep an industry in business.

Michael E. Porter differentiates two factors which can have an effect on how much of a threat new entrants may pose:

Barriers to entry

The most attractive segment is one in which entry barriers are high and exit barriers are low. It's worth noting, however, that high barriers to entry almost always make exit more difficult.

Michael E. Porter list 7 major sources of entry barriers:

• Supply-side economies of scale
• Demand-side benefits of scale
• Customer switching costs. These are well illustrated by structural market characteristics such as supply chain integration but also can be created by firms. Airline frequent flyer programs are an example.
• Capital requirements – clearly the Internet has influenced this factor dramatically. Web sites and apps can be launched cheaply and easily as opposed to the brick and mortar industries of the past.
• Incumbency advantages independent of size (e.g. customer loyalty and brand equity)
• Access to distribution channels
• Government policy such as sanctioned monopolies, legal franchise requirements, patents, and regulatory requirements.

Expected retaliation

For example, a specific characteristic of oligopoly markets is that prices generally settle at an equilibrium because any price rises or cuts are easily matched by the competition.

Threat of substitutes

A substitute product uses a different technology to try to solve the same economic need. Examples of substitutes are meat, poultry, and fish; landlines and cellular telephones; airlines, automobiles, trains, and ships; beer and wine; and so on. For example, tap water is a substitute for Coke, but Pepsi is a product that uses the same technology (albeit different ingredients) to compete head-to-head with Coke, so it is not a substitute. Increased marketing for drinking tap water might "shrink the pie" for both Coke and Pepsi, whereas increased Pepsi advertising would likely "grow the pie" (increase consumption of all soft drinks), while giving Pepsi a larger market share at Coke's expense.

Potential factors:

• Buyer propensity to substitute. This aspect incorporated both tangible and intangible factors. Brand loyalty can be very important as in the Coke and Pepsi example above; however contractual and legal barriers are also effective.
• Relative price performance of substitute
• Buyer's switching costs. This factor is well illustrated by the mobility industry. Uber and its many competitors took advantage of the incumbent taxi industry's dependence on legal barriers to entry and when those fell away, it was trivial for customers to switch. There were no costs as every transaction was atomic, with no incentive for customers not to try another product.
• Perceived level of product differentiation which is classic Michael Porter in the sense that there are only two basic mechanisms for competition – lowest price or differentiation. Developing multiple products for niche markets is one way to mitigate this factor.
• Number of substitute products available in the market
• Ease of substitution
• Availability of close substitute

Bargaining power of customers

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program. Buyers' power is high if buyers have many alternatives. It is low if they have few choices.

Potential factors:

• Buyer concentration to firm concentration ratio
• Degree of dependency upon existing channels of distribution
• Bargaining leverage, particularly in industries with high fixed costs
• Buyer switching costs
• Buyer information availability
• Availability of existing substitute products
• Buyer price sensitivity
• Differential advantage (uniqueness) of industry products
• RFM (customer value) Analysis

Bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. If you are making biscuits and there is only one person who sells flour, you have no alternative but to buy it from them. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources.

Potential factors are:

• Supplier switching costs relative to firm switching costs
• Degree of differentiation of inputs
• Impact of inputs on cost and differentiation
• Presence of substitute inputs
• Strength of distribution channel
• Supplier concentration to firm concentration ratio
• Employee solidarity (e.g. labor unions)
• Supplier competition: the ability to forward vertically integrate and cut out the buyer.

Competitive rivalry

For most industries the intensity of competitive rivalry is the biggest determinant of the competitiveness of the industry. Having an understanding of industry rivals is vital to successfully marketing a product. Positioning depends on how the public perceives a product and distinguishes it from competitors‘. An organization must be aware of its competitors' marketing strategies and pricing and also be reactive to any changes made. Rivalry among competitors tends to be cutthroat and industry profitability low while having the potential factors below:

Potential factors:

• Sustainable competitive advantage through innovation
• Competition between online and offline organizations
• Level of advertising expense
• Powerful competitive strategy which could potentially be realized by adhering to Porter‘s work on low cost versus differentiation.
• Firm concentration ratio

Usage

Strategy consultants occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. However, for most consultants, the framework is only a starting point and value chain analysis or another type of analysis may be used in conjunction with this model. Like all general frameworks, an analysis that uses it to the exclusion of specifics about a particular situation is considered naïve.

According to Porter, the five forces framework should be used at the line-of-business industry level; it is not designed to be used at the industry group or industry sector level. An industry is defined at a lower, more basic level: a market in which similar or closely related products and/or services are sold to buyers (see industry information). A firm which competes in a single industry should develop, at a minimum, one five forces analysis for its industry. Porter makes clear that for diversified companies, the primary issue in corporate strategy is the selection of industries (lines of business) in which the company will compete. The average Fortune Global 1,000 company competes in 52 industries.

Criticisms

Porter's framework has been challenged by other academics and strategists. For instance, Kevin P. Coyne and Somu Subramaniam claim that three dubious assumptions underlie the five forces:

• That buyers, competitors, and suppliers are unrelated and do not interact and collude.
• That the source of value is structural advantage (creating barriers to entry).
• That uncertainty is low, allowing participants in a market to plan for and respond to changes in competitive behavior.

Also, the last chapter of the book: "Age of agile" attributes the bankruptcy of Porter's firm to the outdated nature of his model around competitiveness instead of creating customer value and not making the customers at the center of the universe, i.e customer centricity.

An important extension to Porter's work came from Adam Brandenburger and Barry Nalebuff of Yale School of Management in the mid-1990s. Using game theory, they added the concept of complementors (also called "the 6th force") to try to explain the reasoning behind strategic alliances. Complementors are known as the impact of related products and services already in the market. The idea that complementors are the sixth force has often been credited to Andrew Grove, former CEO of Intel Corporation. Martyn Richard Jones, while consulting at Groupe Bull, developed an augmented five forces model in Scotland in 1993. It is based on Porter's Framework and includes Government (national and regional) as well as pressure groups as the notional 6th force. This model was the result of work carried out as part of Groupe Bull's Knowledge Asset Management Organisation initiative.

Porter indirectly rebutted the assertions of other forces, by referring to innovation, government, and complementary products and services as "factors" that affect the five forces.

It is also perhaps not feasible to evaluate the attractiveness of an industry independently of the resources that a firm brings to that industry. It is thus argued (Wernerfelt 1984) that this theory be combined with the resource-based view (RBV) in order for the firm to develop a sounder framework.