Porters Five Forces Model free essay sample

These five forces are helpful in developing a businesses international strategy. Like anything else developed there are limitations to the model techniques. This paperwork will briefly discuss the Five Forces model and how it can be applied to today’s organizations. Imagine yourself as a boxing coach. Your trainee is beating U. S competitors with ease. You decide he is ready for an international fight. You are preparing for a huge fight against an international champion. What are some of the steps you would take to ensure your fighter is ready? You wouldn’t send them into the ring unprepared for the battle. As a coach with an ambition to succeed you would want to ensure you develop a strategy that will prepare your fighter to be in the best position to win. In my opinion, Porter’s Five Forces model is similar to the scenario I provided above. It will assist an organization (fighter) in determining the strength of the organization (fighter) as it strives to uphold a competitive status. 2) Threat of rivalry: Apple also does not have to worry too much about the threat of rivals. This was not the case prior to the introduction of the iPod and iPhone. Before the iPod and iPhone came along, most organizations within the consumer electronics industry put forth relentless efforts of RD in order to introduce a product that was both new to the market and very unique. The problem for most organisations in this industry is that Apple had the most success with this before other firms. Once Apple introduced the iPod and iPhone, it quickly rose to the top and gained the advantage on rivals such as Samsung. Of course, it didnt stop there for Apple, as the company continuously innovated and introduced new products to the market such as the iPad. 3) Threat of substitute products or services: It is evident that a simple smart phone could be viewed as a substitute to the iPhone, a simple mp3 player to the iPod, and a Samsung tablet to the iPad. Apple dominates in such great fashio because the company has achieved economies of scale, enabling it to produce at a lower cost, and Apple simply markets better than its competition. Apples brand equity and brand recognition is so high and well known that it further establishes an advantage over its substitute competitors. It is true that there are substitutes readily available, but Apple has done such a phenomenal job marketing its products that its customer perceives its products to be better quality and better value to that of its competitors. 4) The bargaining power of suppliers: Considering that there are many organisations operating in the consumer electronics industry, organisations tend to be more elastic with respect to suppliers. If a given supplier were to increase its prices, an organization would likely seek out an alternative supplier, since there are so many firms within the industry. It must be noted, however, that suppliers in this industry have some power with respect to what they are supplying. The fact that the suppliers are supplying unique and highly differentiated materials is what gives them such power. Their ability to supply such unique and differentiated materials gives the suppliers some bargaining power. 5) The bargaining power of customers: The threat of buyers, is really no threat to Apple. For starters, Apple has millions of buyers, some of which are large corporations. Secondly, Apples products are both unique and differentiated, illustrating the power of buyers is lower. In this case, Apple does have the ability to increase its prices on some of its products because of the unique product offering and due to the fact that the majority of its products are well differentiated from the competition. It is important, however, for Apple to ensure that the price increase is not too drastic or some customers may begine seeking altenatives. Importance: Five Forces Model Porters five forces model determine a companys competitive environment, which affects profitability. The bargaining power of buyers and suppliers affect a small companys ability to increase prices and manage costs, respectively. For example, if the same product is available from several suppliers, then buyers have bargaining power over each supplier. However, if there is only one supplier for a particular component, then that supplier has bargaining power over its customers. Low-entry barriers attract new competition, while high-entry barriers discourage it.