Abstract—We show how Porter’s five forces that shape competitive strategies can be linked directly to long term profitability of industries, as measured by the return on invested capital. Illustrative cases from the Book Publishing and Luxury Cruise industries are used to demonstrate the linkage. The complete functional linkage was established with a33-industry data base. As the five forces framework has become a staple approach to strategic analysis, playing a key role in both business practices and academic studies, this quantitative linkage to profitability provides analysts a powerful tool to evaluate their business propositions based on their subjective rating of the competitive forces involved. Of even greater potential is the prospect of a systematic exercise to train managers in innovative strategies through business intelligence, by bench marking businesses facing like forces outside of one’s industry, rather than conventional practices within one’s own.

Index Terms—Strategic innovation, competitive forces, return on invested capital.

James K. Ho is with University of Illinois at Chicago, IL 60607, USA(email: jimho@uic.edu).

Cite: James K. Ho, "Strategic Innovation through Business Intelligence: Linking Competitive Forces to Profitability," International Journal of e-Education, e-Business, e-Management and e-Learning vol. 2, no. 4, pp. 280-285, 2012.