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Porter's Five Forces Essay

1157 words - 5 pages

In the following document I will be discussing the Porter’s five-force model and how it is used in order to develop an international strategy. As with any group that forms with a common goal, any organization that wishes to be successful must have a strategy in place that guides the different functional aspects of the organization not only as a whole, but at a granular level. Organizations that perform business, especially on a global scale, create a plan that defines what the organization will accomplish in the next year or more along with directions and responsibilities for each part of the organization. In developing the strategic plan, the team must take into account multiple ...view middle of the document...

All ecosystems have a limited number of resources, therefore, the higher the number of individuals depending on these resources, the more strain these resources become. Limitations in resources can have detrimental effects on an organization; this is why competitors will become involved in factors such as economies of scale, lobbying for government reform and deregulation, further integrating themselves in the distribution chain, and obtaining patents and copyrights among others. An example of this is how Google purchased Motorola Mobility; it was not the interest of Google to purchase the company, but to obtain all the patents owned by it. The limited number of mobile consumers along with a high number of companies entering this market increases the amount of rivalry. The acquisition of these patents provides Google a safety barrier against lawsuits from major competitors in the mobile market while at the same time arming them with enough power to take a competitor down using the court system (Patel, K., Lee, E., 2011).

As discussed previously, the threat of having a lower customer base increases the rivalry between companies. This lowering can be caused by the third force discussed in the model: the threat of substitutes. In many cases, customers will acquire a cheaper product is the quality or features are similar. To prevent this decrease in many organizations will try to lower the prices, but this is not always an option due to manufacturing cost. The introduction of substitutes might in the best case scenario cause a company to lose some earning, in the worst case scenario a company could bankrupt. In other to fights against this force a company should aim to have a business that is not too specialized and can evolve with the industry, of course this is not always the case and we see companies disappearing day by day. An example of this is how Kodak went from 90% market share in the late 90s to bankruptcy in 2012. The inability of this company to change their business as substitutes to their product started to appear (the digital camera), made their profit shrink until a complete turn-around in strategy was required (De La Merced, M.J., 2012).

Not only is the market changed by how much companies compete against each other, but also how customer business perception and needs can define what companies can even compete in the industry. The fourth force discussed, buyer power, should be closely analyzed by organizations. Buyers can shape not only the product, but how it is distributed. In order for companies to gain control over this force,...

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