Business / Porter's Five-Forces Model In International Strategy

Porter's Five-Forces Model In International Strategy

Autor:  bigbeatz27  14 July 2011
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Words: 1039   |   Pages: 5
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Introduction

There are several different techniques and models that decision makers use to enable their organizations to sustain a competitive advantage within their respective industries. One model that stands out and is still a major part of developing business strategies today is Michael Porter’s Five Forces Model. Since the emergence of Porter’s framework, it has proven to be a valuable tool in analyzing a firm’s industry structure in strategic processes. According to Porter, the competitive environment is created by the interaction of these forces acting on an organization.

Porter’s Five Forces

The first of Michael Porter’s Five Forces is the degree of rivalry. Rivalry exists in all industries. It is what keeps competition ongoing between organizations. This force is said to be the most powerful of the five competitive forces. In various industries, businesses are considered to be mutually dependent. If one organization makes a competitive move, it will affect all others in the same industry and they will react accordingly (Helms and Cengage,2006).

The second force in his model is the threat of substitutes. A substitute product is defined as a product that can satisfy consumer needs that are also targeted by another product. For instance, cigarettes can be substituted by electronic cigarettes. This force ties into the rivalry force in that substitute products tend to cause an increase in competitive pressures as the price of the substitute products decrease (Helms and Cengage,2006).

The next of the five forces is the bargaining power of buyers. This is the impact that consumers have on a producing industry. When buyer power is strong, the producing industry becomes one in which there are many suppliers and one buyer, so to say (QuickMBA.com, 2010). When a market experiences these conditions, the buyer has the power and sets the prices.

The fourth force is the opposite of the previous one mentioned, the bargaining power of suppliers. When...



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