Porters Five Forces

Part A

Background information

Porter’s five force is a useful tool for strategic analysis where organization analysis the competitive environment as well as potential profitability. The business strategy was introduced by Michael Porter and today, many industries have benefited by using this tool in industry analysis.  In establishing this strategy, Porter asserted that rather than focusing on rivalry, organization should go beyond and analyses factors such as   power of the suppliers and buyers, threat of substitution and new entrants in the market (Prasad & Warrier, 2016). These factors increases survival industries in some industries while others collapse in the competitive market simply because of the different structure and strategy. For organization to survive in the ever-changing economy, it should understand the forces in the environment an implement the best strategies to control the forces. Industry environment is a determinant in the competitive market because by understanding the competitive environment, the industry will not only create a strategic decision but it will also establish attractive segments and competitive advantage (Prasad & Warrier, 2016).

 Porter’s five forces are used when organization need to make qualitative evaluation and analyze strategic implications for the organization to survival in the competitive market. In essence, strategists in all organization play a significant role in ensuring that the business is in a position of coping with the changes in the ever-changing economy.  However, Porter introduced the five forces to help the strategists with a new approach where rather than focusing on the direct competitors, they should also consider other competitive forces which affect the business competitiveness and profitability (Prasad & Warrier, 2016). Thus, an executive would use the analysis of five forces to understand the organization structure, competition and how to maintain profitability. Note that the five forces are competitive forces and analyzing these forces gives the organization an insight to see the current as well as future profitability and competition. Focusing on the five forces, an executive would use the force of competitive rivalry to understand the degree of competition in the market and manage the condition with strategic approach.  An executive also look at the   different and substitute goods from other companies and may decide to change technology and more (Prasad & Warrier, 2016).  Power of suppliers and customers is a determinant factor and an executive may look at the changing power and implement strategies to cope with the changes. Last, an executive may consider analyzing the new entrant and the driving factors such as government policies, economies of scale and more.

 

Advantages and disadvantages

According to Luttgns & Diener (2016), porter’s five analysis has benefits in that the organization is able to understand the threats that will affect the company and implement strategies to address the threats. For instance, if the forces are strong, the organization is at risk and need to create strategies as early as possible to avoid business downfall.  It also understands the opportunities and creates paths for implementing the best strategies to achieve the opportunity, maximize profit and maintain the competitive advantage. The forces provides the organization with a positive insight that opens the door for profitability and attractiveness.  The analysis will provide both strength and weakness, and the strength together with strategies will eliminate the weaknesses and place the organization in a stronger position (Lüttgens & Diener, 2016). However, the five forces are associated with disadvantages in that the model is static and it does not fit in the ever-changing economy. In other words, the model lacks ‘time dimension’ which managers could use to understand the changing environment. Given that the model does not consider the consistent changes, the competitive advantage is not sustainable. Note that organizations are in the age of digitalization and globalization but the five forces do not consider these structural changes (Lüttgens & Diener, 2016).

Impacted strategies

The analysis of the five forces will force the organization to implement a number of strategies. In other words, there are strategies that will be impacted and its impact will   increase the competitive advantage (Rice, 2010). The first strategy that will be impacted is the cost leadership- this means that the organization will use the strategies such as cost reduction and increase market share. The other impacted strategy is the differentiation-this means that the organization will do good research and innovation to produce quality goods and services different from other companies.  Difference should also be in sales and marketing to attract customers. Last is the focus strategy and this means that the organization will need to pay attention on the customers’ needs, focus on niche markets ensure brand loyalty and lower cost (Rice, 2010).

Part B

Porter’s five analysis in Duracell

 Duracell is a manufacturing company in America and it is well known for the manufacturing of alkaline batteries. Since 1940, Duracell has been showing higher performance and its strategies has placed it in a stronger position in the competitive market.  Like any other business, the company uses the five forces to analyses the competition as well as profitability (Davis et al, 2004). The company strives to be the market leader and it ensure that its brand is recognized in segment market   that comprise male and young boys. This group show a high interest in electronic items and the company provide customers with batteries that lasts longer. The strength that makes the company position itself in the competition market include strong brand loyalty, it offer quality services to its customers, and it uses an advanced technology and strong networks (Davis et al, 2004). 

Application of porter’s five forces

            Duracell has a high competitive advantages which is influenced by the availability of resources to produce alkaline batteries. It sells its products at low cost and due to price sensitivity, the customers’ purchasing power is high. Customers do not focus on brand name or new batteries but they are influenced by the brand loyalty and strong relationship with its customers. Given that  availability of resources  maximizes  the  competitive advantage,  the company  faces  a  low threat  of substitute and low  rate of new entrants. Even though many electronic manufactures such as Panasonic and everyday produce similar products, Duracell has a unique strategy   helps it overcome the threat of substitute. It produces unique products, with cheap prices which increases customer base and marketing outcomes.  The company competes with Energizer but due to the higher market share which is estimated to be over 30% and the strategies such as low-cost, research and development and quality advertisement, it has occupied a strong position (Davis et al, 2004). Due to the ever-changing economy in the third world countries, the power of suppliers is low. In contrast, the power of buyers is high where buyers both professionals and for recreational users have different needs and requirements and the company ensures that the needs are met (Davis et al, 2004).

 

 

 

Duracell

 

Porters’ five forces

 

 

Competitive rivalry	·         Fast industry growth ·         Few competitors ·         Competitors’ products lack public respect ·         Government policies
The threat of substitution	·         Low threat of substitution ·         Lower performance ·         Lower quality ·         Low complementary products ·         Strong customer base
Supply power	·         Low power of suppliers ·         Has a higher power to control the suppliers ·         Has unique products
Buyer power	·         Higher power of buyers ·         Higher demand for products ·         High brand loyalty ·         Inelastic demand ·         Limited buyer choices
New entrants threat	·         Fewer entrants ·         Durable barrier ·         Geographical factors

 

 

 

 

References

Davis E., Nikolov D.,& George S Emily. (2004). The Gillette Company.  PAConsulting, LLP

 

Lüttgens, D., & Diener, K. (2016). Business Model Patterns Used as a Tool for Creating (new) Innovative

Business Models. Journal Of Business Models, 4(3), 19-36.

 

Prasad, A., & Warrier, L. (2016). Mr. Porter and the New World of Increasing Returns to Scale. Journal Of

Management Research (09725814), 16(1), 3-15.

 

Suwardy, T., & Ratnatunga, J. (2014). Business Landscaping for Strategic Advantage: Evidence from a

Multi-Sector Study. Journal Of Applied Management Accounting Research, 12(2), 1-15.

 

Rice, J. F. (2010). ADAPTATION OF PORTER'S FIVE FORCES MODEL TO RISK MANAGEMENT. Defense AR

Journal, 17(3), 375-388.