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. The first force component in Porter’s model is a potential new entrant. Organizations must analyze the existing companies that are providing the same service.
In my example I am going to talk about IKEA (one of the largest players in the home furnishing market).
Due to the substantial amount of money needed to start up a home furnishing shop IKEA is able to reduce the threat of new entrants. In addition to this IKEA not only provides furniture but kitchen and home accessories. The limitation in this force could possibly be that IKEA fails to reach small towns. The closest IKEA to my home is over an hour away. I won’t drive an hour away to shop at IKEA unless I absolutely want something, instead I will choose a local furniture store to purchase my items.
The Business plan on Marketing Strategy at Ikea
Synopsis The case study is to discuss about the different strategy used by IKEA to approach their customers. It is also talking about the localization concept from a global company based on the cultural demand from different countries worldwide. IKEA is also famous for their less expensive furniture, has some other strategies to “reach” the customers based on their needs. 4 Ps concept plays a very ...
The second force component is buyer’s bargaining power. If the price is right the buyer will choose to continue to purchase items at the store. IKEA sells furniture a low price and when customers compare the price with other businesses they realize that IKEA is the best route to go. With this being said, IKEA becomes dominant over its buyers. This is how they try to attract and keep their customers coming back. As for me, I would rather spend the extra money at another store for the convenience instead of driving over an hour. The third force is a suppliers bargaining power.
If you have one or two source of receiving products you open the door to bargaining. IKEA has several suppliers in addition to their own production and design factories. Due to this, they leave the suppliers little to no power to bargain. The fourth force component is threat of substitutes. As stated earlier the products sold by IKEA are already at a low price. If another organization tries to sell a product similar (substitute the product) and reduce the price less than IKEA they risk the chance of losing profit or gaining no profit.
Last but not least is the competitive rivalry. Competition amongst organizations is intense. Organizations want to succeed and most have the dream of becoming global. Due to this ambition the rivalry amongst organizations is intensified. Companies want to provide clients with services that will keep them coming back. As a result of this the competition is powerful and becomes enmity between organizations providing the same services. A limitation of Porter’s Five Force Model is it focuses mainly on external factors.
It is tended to analyze the outside surroundings and focus on competitor’s verses developing on the strengths and capabilities that an organization brings to the industry (Morstan, 2012).
Porter’s model was developed over thirty years ago and even though it is still effective technology has changed drastically. Additionally, “Porter himself admitted in his book that the presence of governmental regulation in the market effects the model’s reliability; and the presence of increased globalization and technology may have significantly altered dynamics of economic growth and competition since the models inception in 1979. In conclusion, like the boxer who is about to enter an international fight must prepare an organization must develop a solid strategy if they want to succeed globally. Managers observe competition narrow and this can lead failure. Porter’s Five Forces Model eliminates that tunnel and provides management teams with the five components that should be analyzed prior to developing a firm strategy. Porter’s model enables organizations to, “measure the industry’s attractiveness, competitive trends and plot future strategy” (p. 45).
The Essay on Porter Five Forces Model
Porter’s Five Forces Model: an overview Porter’s Five Forces Model: an overview Abstract Porter’s Five Forces Model is a structured framework for analyzing commerce and business establishment. It was formed by Michael E. Porter of the Harvard Business School between 1979 and the mid 1980’s. Porter developed the Five Forces model in opposition to the SWOT (strengths, weaknesses, environmental ...
REFERENCES Porter, M. E. (1980).
Competitive Strategy: Techniques for Analyzing Industries and Competition (p. 145).
New York: The Free Press Raab, G. (2010) The Psychology of Marketing: Cross-Cultural Perspectives. Gower Publishing. Retrieved from http://research-methodology. net/ikea-porters-five-forces-analysis/ Sharma. B. (2006) Change Management. Tata McGraw-Hill International. Retrieved from http://research-methodology. net
