Porter’s Five Forces Model Porter’s five forces use for; to develop a wide and detailed analysis of competitive position (especially on industry level), while the determining and creating new strategies, planning, making investments or disinvestments for current or a brand new business or organization. (Businessballs, Michael Porter’s Five Forces Competition Theory Model, 2009). Porter’s five forces determined as; Supplier Power; Differentiations of inputs, supplier concentration, importance of volume to supplier, switching costs of firms in the industry, impact of inputs on cost or differentiation, presence of substitute inputs, threat of forward integration, cost relative to total purchases in industry” “Threat Of New Entrants; Economies of scale, access to inputs, government policy proprietary learning curve, absolute cost advantages, capital requirements, brand identity switching costs access to distribution, expected retaliation, proprietary products. “Buying Power; Buyer volume, buyer information, buyers’ incentives, bargaining leverage, brand identity, price sensitivity, threat of backward integration, product differentiation, buyer concentration against industry, available substitutes. ” “Threat of Substitutes; Switching costs, buyer inclination to substitute, price performance trade-off substitutes. ” “Rivalry among current competitors; Growth rate of industry, extent of exit barriers, amount of fixed cost, competitive structure of industry, presence of global customers, absence of switching costs, demand conditions. (Management Study Suide, Porter’s Fiver Forces Model of Competition, 2013. QuickMBA, Porter’s Five Forces, A Model For Industry Analysis, 2010) In my opinion Porter’s five forces are very useful not just in theory, also in practice. At present day, momentum of innovation is rapid and this speed of changes forces, existing companies on the market and new entrants to make quick decision.
This speed can be fatal for the both sides and preventing this fatal mistakes on the market, at the same time making quick, everlasting and healthy plans, adopting and implementing Porter’s five forces can be considered in the industry level, for the firms as a matter of life and death. Prevision of forming industry, at present day, is a must for existence. That’s why all this important factors of Porter’s five forces is useful in our day, maybe with the necessity of bit speedy conclusions for decision making.
I want to give Nokia Company as an example. Nokia was leading the mobile phone sector after taking over the leadership from Motorola and its throne was looking like impossible to capture. When the smart-phone era came with the technological developments, Nokia came up with ‘Symbian’ operating system. Nokia, as the market leader, was still holding and leading far away from its competitors. Even Nokia customers were willing to pay more for the same technology, same rating products more, because of well-known brand name (Buying power).
While Nokia was going with one track in mind with Symbian, Apple was entering the smart phone market with ‘iPhone 2g’ and Samsung was appearing on the scene with its new processor system ‘Android’ (Threat of new entrants). Nokia went with one-mind track with the Symbian processor system and Symbian stayed outdated against the new entrants, in new smartphone rivalry era. Nokia’s performance with Symbian was staying much lower than the Nokia-buyer’s expectations while rivals of Nokia were boosting perfection to their customers. Threat of substitutes) Finally at the second quarter of 2011, Apple has been overtaken Nokia in smartphone stakes and passes the ‘former king of the ring’ even in usage stats in second quarter of 2012. I would use Porter’s five forces; If I would be a SMS company manager; I would try to look for opportunities, where market leaders have gaps and in which levels of the competition I can take the advantage on my firm.
As a new entrant, especially with lower budget than your competitors, is of course, a hard task but I would try to find my competitors ‘achilles’ (weaknesses) as a new entrant and try to focus on perfections what can the already-existing players couldn’t do. If I would be a manager of a company, which is existing in the market and one of the big players of the industry; I would try to analysis of potential opportunities and threats well in the market to put always one step ahead my firm against the new entrants and current rivals.
I think in current day, R;amp;D has a significant importance and its importance increasing constantly. It is also up to that my company will be in which industry but for lowering costs, and increasing output (without compromising) is significant for most of the industries. Reference List QuickMBA, 2010. Strategic Management: Porter’s Five Forces, A Model For Industry Analysis. Retrieved April 14, 2013, from http://www. quickmba. com/strategy/porter. shtml Businessballs, 2009. Porters Five Forces Model: Michael E Porter’s Five Forces Of Competitive Position Model and Diagrams.
Retrieved April 14, 2013, from http://www. businessballs. com/portersfiveforcesofcompetition. htm Management Study Guide, 2013. Porters Five Forces Model Of Competition. . Retrieved April 14, 2013, from http://www. managementstudyguide. com/porters-model-of-competetion. htm MacRumors (Financial Times), 2011. Apple tops Nokia to become Worlds Top Smartphone Vendor. Retrieved April 14, 2013 http://www. macrumors. com/2011/07/21/apple-tops-nokia-to-become-worlds-top-smartphone-vendor/ http://www. todaysiphone. com/2013/02/apple-passes-nokia-on-global-mobile-internet-usage-rankings-for-the-first-time-ever/