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Write a 7 pages paper on porters five forces model of strategy. Companies need to re-examine their market strategy if a change occurs in any of the five forces. Various companies make use of Porter’s
Write a 7 pages paper on porters five forces model of strategy. Companies need to re-examine their market strategy if a change occurs in any of the five forces. Various companies make use of Porter’s Five Forces Model for increasing the effectiveness of their business strategies by considering the environment of their businesses. Porter focused on the power of competition in the market whereas blue ocean strategy, developed by Kim and Mauborgne in 2005, makes the companies move towards growth and higher profits through innovation. Porter’s model focuses more on those powers, which can affect the business of a company whereas the blue ocean strategy focuses on the concept of innovation and improvement. Blue ocean strategy values innovation in all aspects of a business whereas Porter’s model focuses more on analyzing the forces that have the ability to affect the business. The five forces which help a company determine its power in a business situation include supplier power, buyer power, competitive rivalry, the threat of substitution, and the threat of new entry. Let us discuss all of these forces in order to get a better understanding of Porter’s model.
Supplier companies are those companies, which supply raw material, labor, and some other services to a company. Supplier power is one of the forces, which directly influences a company’s business. It is extremely important for a company to do a thorough analysis of the suppliers in order to design a competitive business strategy. Suppliers play an important role in setting the prices for a company’s products. The price they charge to a company for delivering the raw material affects the prices of the company’s products. The bargaining power of suppliers can act as a power source over a company with a few suppliers. The suppliers become more powerful if a company has a limited number of available suppliers. In such cases, the supplier’s charge high prices to the company which results in increasing the product prices. Therefore, we can say that supplier power is one of the major powers influencing a company’s business.
Buyer power is another power source, which affects the business of a company. Porter’s Five Forces model is geared towards the need to analyze the buying power in order to achieve competitive advantage whereas the Blue Ocean strategy makes the companies achieve higher profit through low cost and differentiation. Analysis of the buying power is extremely important because buying power adversely affects the companies by driving down the prices of the products. There are a number of factors, which play an important role in raising buyer power. Some of those factors include the total number of buyers, the financial strength of the buyers, and the importance of buyers for a company. In any market, when the buyer power becomes stronger, monopsony occurs. Monopsony is a term used to describe the state of fewer buyers and more suppliers. In such cases, the prices of the products of a company are set by the buyers because of increased competition. .
