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Discussion of porter's five forces
Discussion of porter's five forces
Applying information to porter's five forces
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Ten Practical Implications The implications of Porter’s work, as cited in the Epilogue of Magretta (2012), are listed and discussed below: 1. Vying to be the best is an intuitive but self-destructive approach to competition. a. Practical examples of this statement are: • Brand extension failure: Colgate's Kitchen Entrees frozen dinners, Smith and Wesson bicycles, Frito-Lay Lemonade, Maxwell House Ready-To Drink Coffee and Clairol's “Touch of Yogurt” shampoo are great examples. • The retail industry in 2008: Competing companies had to downsize their workforce, massively restructure or even close down while facing successive downturns and online competition. T. J. Maxx, a department store chain, survived the downturn onslaught by focusing on its value proposition of budget friendly fashion labels. • The semiconductor industry in 2009: Severe price undercutting and frequent product refreshes led to critically low margins and few companies like Intel, Samsung and Qualcomm survived the downturn. b. Apart from brand confusion, competing to be the best, although initially advantageous to customers in terms of price reductions is disastrous for companies due to the costs involved in this race to converge offerings. c. Since consumers are different and have different needs, companies should focus on their “niche” market segments. 2. There is no honor in size or growth if those are profitless. Competition is about profits, not market share. a. Practical examples of this statement are: • The failures during the merger boom era of 1990-2014: Many highly publicized mergers and acquisitions (M&A) failed during this era, notable ones include Daimler-Benz and Chrysler, AOL and Time Warner, eBay and Skype, Kmart and Sears, Bank of ... ... middle of paper ... ...nment. c. Strategic planning also involves a decent bet on the unique value proposition. d. Magretta (2012) shows with the Dell’s and Nestlé’s examples that once the commitment is visible and the supply chain is functional, even suppliers will contribute to the company strategy. e. In recent times, the internet revolution, the mobile device era, deregulation and globalization have changed whole ‘industry structures’ which has caused severe turbulence and uncertainty for planning. Magretta’s (2012) example of Apple’s turbulent past shows that good strategy will ensure sustainability by facilitating the right tradeoffs and the right innovation. Works Cited Magretta, J. (2012). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Press. Retrieved from http://common.books24x7.com.ezp-01.lirn.net/toc.aspx?bookid=45565
When I first read some of Miss Porter’s work, I came away feeling depressed, empty and wondering why she even wrote. Her stories seemed unfinished, incomplete and pointless. However, I find myself thinking about those works, discovering new things and realizing a deeper meaning in the stories.
The literature suggested that “Rapid changes in the external environment of organisations have been accompanied by calls for accountants to change the nature of information they provide, the skills they possess and the role they play in the organisation. The proposed changes, which are encapsulated under the phrase accounting for strategic positioning or strategic management accounting are two pronged. On one hand accountants are required to reposition themselves in the organisation hierarchy where they will be involved in the formulation, implementation and choice of strategies. Accountants are also being urged to adopt a range of techniques whose emphasis is futuristic and external to the firm especially emphasizing the importance of monitoring customers and competitors.” (Nyarnori, 2000). Based on my studies on the industry of stock brokerage, I agree with the statement that “The tools and techniques that were covered in the Strategic Cost Management and Strategic Business Analysis courses are very useful in providing decision oriented information to senior management in my organisation and such information will ultimately enhance its corporate value.” The essay (How Porter’s Five Forces Model shapes strategy for a new and small-size stockbroker) may be one of applications of those techniques learnt from the Strategic Cost Management and Strategic Business Analysis .
Flat demand and foreign competition made the early 90’s tough for the big three. In 1992 GM chalked up the largest annual loss in US corporate history, around $4.5 billion.
Rivalry among established firms is fierce. There are several factors that illustrate this: established market players (6.1). The product is highly standardized and the switching costs of the customers are low. Players are aggressive (6.2)
As the business, people put it, to maximize the wealth of shareholders (Peavler, 2016). This could be done by pursuing more of an immediate reason that will realize the shareholders wealth maximization goal. However, this main reason may fail to be realized as most mergers depict negative results.
Apple has made reasonable management of its human and material resources since its innovational approach demands effective strategic allocation of its resources to the development and utilization of its productive resources to support its innovative investment strategies. Effective strategic control brings power to Apple’s decision-makers to allocate its resources to confront the technological, market, and competitive uncertainties which are inherent in the innovation
The technology industry is also an industry prone to threats of substitutions. From the consumer products to their healthcare technologies, everything can be taken over by a newer technology or a more efficient
There are several main avenues to take when creating market niches. In the twelfth edition of Marketing Management, authors Philip Kotler and Kevin Keller list several common types of market niches, two of which, are the End-user specialist and the Product-feature specialist. According to authors Kotler and Keller, the End-user specialist is a firm that “specializes in serving one type of end-use customer.” An end-use customer, simply stated, is the customer who will eventually receive the product for its intended purpose. For example, the costumer who buys candy bars from a candy bar manufacturer is not usually the end-use customer. Usually a store buys the candy bars from a candy bar manufacturer. The store has no intentions for using the candy bar for its intended purpose. The consumer who buys the candy bar to eat is the End-use customer. End-use specialists sell products that are only intended for certain consumers. Product-feature Specialists focus on producing a product. Authors Philip Kotler and Kevin Keller state that Product-feature specialists are firms that specialize “in producing a certain type of product or feature.” Usually these types of firms or companies try to create something new where there is little to no competition.
In a world of free trade, growing competition and accessibility to foreign markets, the need for methodical market analysis and assumptions is steadily rising in today’s business environment. It is just a normal way of thinking to primarily intent to eliminate the financial before entering a new and foreign market. This suggests that enterprises have to develop an overall strategy for their business in order to gain competitive advantage and consequently market share. With the words of Michael E. Porter, professor at Harvard University and leading authority on competitive strategy, this desirable market success is indirectly linked to the individual structure of a market. The unique structure of a single market influences the strategic behaviour and the development of a competitive strategy within a firm. The competitive strategy finally decides whether a company performs successfully on the market or not. Referring to this interpretation of business success, M. E. Porter established his five forces framework that enables directives to gather useful information about the business environment and the competitive forces in industries.
Porter, M. E., 1999. The Five Forces that Shape Competitive Strategy. Harvard business review, p. 80.
It has been observed since the inception of Marketing that marketers target to only specific market and how they identify such market. There are certain criteria or base they use to identify the consumers who they would be serving to. Customers do have unique requirements satisfaction levels and aspirations. Some customers however are similar with respect to their requirements of goods and services. In such case if their needs are identified and they can be grouped in quantities of a specific size then it can be segmented. Now each customer group have specific expectations and businesses must cater to the needs of the segmented that has been targeted.
Scale Economies: the industry contains several very large players and multiple medium to small players
Pricing. Our product is priced lower than our competitors in our industry. Even though our competitors have a different kind of product compared to us.
Threat of substitutes in market as best quality is not always a priority for some customers as they are price sensitive.
Every consumer has a unique set of needs and resources, so no two consumers will place the same customer value on the same product or service.