MGMT 510 Management Principles- Porter’s Competitive Forces

Questions: 

1. Describe Michael Porter's model and its components. Pick an industry and describe how the different components of the model relate to the industry.

2. Apply all components of Porter's model to your HBR case, as a case review. Your response here must be at least a page, and will likely be more.

Answers

Porter’s Competitive Forces

This paper explores the porter’s competitive forces which aim to determine the weaknesses and strengths of every industry. Additionally, the porter’s competitive forces determine the profitability as well as the competition of every industry since they are interdependent. Briefly, the Porter’s five competitive forces are threat of entry which investigates the level of challenges experienced by competitors when venturing in the marketplace. The second force involves competition within the industry, which determines the number of products and competitors offered. There is a presumption that the higher the competitor opportunities being a threat to the suppliers and buyers, the more the industries seek better deals (E. Dobbs, 2014). The power of the suppliers is a force which is based on the over-dependence of customers to the providers in the case where vendors are few. In such a case, the providers attempt to exercise more power within the industry. The power of customers is a force which is considered in the case where the customers are few, and the buyers are vital to the institution; hence the customers hold more power making it easier to pull the prices down. Finally, the power of business weakens in the case when the buyers purchase the substitute goods and services offered by the competitors.

The porter’s competitive forces are used to explore the banking industry which is selected for this paper. To begin with, there is rivalry amongst the banks due to the emergence of new products, pricing strategies and the forces in the market which cause competition (Rothaermel, 2015). The potential entrants within the bank industry impact the diversity of the banking activities. The threat of the substitutes within the banking industry exposes the banks to competition from other financial sectors. They include the non-banking financial institutions. The buyers bargaining power creates competition from within and outside the banking industry (Porter, 2016). In this case, borrowing increases hence other financial institutions are opened, and avenues for fundraising expand due to the borrowers. Finally, the suppliers bargaining power facilitates creation of new financial markets hence the chances for investments of the depositor’s increases within the banking industry.

The components of the porter’s model are explored by various articles of Harvard Business Review. In this case, the article based on the scorecard as strategic management by Kaplan & Norton, 2007 is discussed. Kaplan & Norton, 2007 argues that the scorecard concept should be considered when the performance metrics of every organization are discussed. Based on the article, the threat of new entrants of the porter’s model allows companies to transform due to the competition. Rivalry amongst the existing firms as discussed in the porter’s model matters in the article since the author indicates that the control systems and the operational management develop due to the targets and the financial estimates (Kaplan & Norton, 2007). The threat of substitutes helps the managers applying the scorecard concept to ignore the financial estimates in the short-term which is significant indicates of the organization’s performance. The article explores the buyer’s bargaining power since it helps in the translation of vision and the strategies which guide the managers towards building consensus within the institutions. Finally, the supplier’s bargaining power allows the companies to engage in business planning as outlined in the article.

In conclusion, the porter’s model provides an understanding of the degree of the competition within any industry and impacts other dynamics in the industry. The five forces are significant in the decision-making of strategic management in every industry.

References

E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.

Kaplan, R. S., & Norton, D. P. (2007). Using the balanced scorecard as a strategic management system. Harvard business review, 85(7-8), 150-+.

Porter, T. (2016). States, markets and regimes in global finance. Springer.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.