Introduction

 Porter's model is a strategic economic model that tries to clarify the underlying reasons driving an external competitive surrounding (Ormanidhi, & Stringa, 2008). Information derived from Porter’s model can then be applied while analyzing one business's strengths against another. Consequently explaining the advantages one region has over another. Porter's model makes use of five factors- rivalry, broker influence, consumer's power, substitution threats, and new entrant threats. According to Porter, those five forces influence competition amongst different economic players. Hence, these five forces impact a business’s competitive surroundings thus distressing profitability (Huggins, & Izushi, 2011). The negotiating power of clients and suppliers influence a business’s capability to increase charges and regulate costs correspondingly.

Application of Porter’s Model

            Porter's concepts can be used to analyze various levels of competition in specified industries. It is commonly used whenever one starts a new business or while penetrating new markets (Hemmatfar, Salehi, & Bayat, 2010). Based on Porter's context, competition emerges from various sources such as the client's purchasing power and substitute goods within that market.  For instance, new market players introduce new prices and push up sales hence gaining a market share. Therefore, new entrants increase competition and rivalry. On the other hand, if market barriers hinder new entrants from penetrating the market, the existing business experience less competition (Pretorius, 2008). Secondly, if a customer has bargaining power, then he or she can seek better alternatives hence the business with a suitable price range can win more customers.

 It is vital to note that Porter's model of organizational approaches should align with external systems. A competitive advantage should depend on comprehending industrial systems and their alternating mannerisms (Esen, & Uyar, 2012). Porter claims that the goal of a tactician is identifying and managing competitive surroundings by designing a competitive environment to suit an organization's needs. Arguably, technological developments and various mechanisms of strategic management such as advanced consumer services and generating valuable goods have helped to prove Porter's argument to be valid and correct in the long run.

How to Apply Porter’s Model

            Porter’s model can influence and shape strategic marketing decisions. For example, a business can decide to focus its attention on customers by offering unique valuable items. Secondly, a business owner may set his or her price a little bit lower or higher than other businesses offering the same service or goods (Boja, 2011). The market forces help businesses conduct business activities based on external market forces. Besides, the model can help in reshaping the business approach as it exposes weaknesses and strengths in relation to trends, pricing, consumer preferences, and supplier pricing. The ability to understand all the five forces influencing competition manifests a company's brand image. More so, Porter's model applies to where there are more than two rivals in the market. Also, business owners can consider industrial patterns and learn how to predict or interpret challenges at different times.

Other Theories Related To the Porter Model

            Before Porter formulates his concepts, previous works claimed that a business can be competitive if only it acquires two or more attributes. In other words, previous competition concepts focused on rivalry while overlooking other market aspects such as consumers, suppliers, and other market forces (Teeratansirikool, et al., 2013). These previous competition ideals failed to identify specific market forces that would give a business or organization a competitive edge based on the external market environment (Baumann, Cherry, & Chu, 2019). Unlike Porter who looked at all competitive aspects, previous scholars gave managerial and organizational factors as reasons for failure. Thus, Porter’s model looked at competition in terms of external market forces rather than internal organizational systems. In summary, theories who came before Porter tried to point out the increased competition in labor, social amenities, and other economic aspects which affected rivalry between organizations.

Analysis of the Impact of Michael Porter’s Work and Paradigm Shift to Competitive Productivity

Powerful consumers could use their power to manipulate charges or demand for more services while paying a lesser price hence taking advantage of themselves. A client's bargaining power increases due to increased rivalry between organizations and a lack of differentiation. In this situation, businesses fail to differentiate their brand name hence giving clients higher bargaining power due to low-quality services (Magretta, 2011). More so, firms in various industrial sectors buy different inputs from traders, which account for the various pricing. Powerful suppliers take advantage of their influence to increase prices or demand for their goods hence lowering profit margins thus giving consumers leverage. The capability of a nation to attain sustainable rates of development in terms of gross domestic product reveals the competitiveness of that particular nation (André et al., 2009). Competitiveness reveals the ability of a nation to remain competitive under a stiff market environment.

Conclusion

 Porter’s model unveiled external market forces influencing competition. Porter’s aim was to aligning internal organizational strategies with external market factors such as pricing and consumer purchasing power. He dwelled on identifying a certain weakness and then putting in place measures to attain a competitive edge. The competition was no longer about looking at a rival organization but offering value and finding better ways of producing quality goods and services.  Also, competition exposes market forces such as consumer bargaining power and other factors surrounding a competitive market.

 

 

 

 

 

 

 

 

 

 

 

 

 

References

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Baumann, C., Cherry, M., & Chu, W. (2019). Competitive Productivity (CP) at macro–meso–micro levels. Cross Cultural & Strategic Management.

Boja, C. (2011). Clusters models, factors and characteristics. International journal of economic practices and theories, 1(1).

Esen, S., & Uyar, H. (2012). Examining the competitive structure of Turkish tourism industry in comparison with diamond model. Procedia-Social and Behavioral Sciences, 62, 620-627.

Hemmatfar, M., Salehi, M., & Bayat, M. (2010). Competitive advantages and strategic information systems. International Journal of Business and Management, 5(7), 158.

Huggins, R., & Izushi, H. (Eds.). (2011). Competition, competitive advantage, and clusters: the ideas of Michael Porter. Oxford University Press.

Magretta, J. (2011). Understanding Michael Porter: The essential guide to competition and strategy. Harvard business press.

Ormanidhi, O., & Stringa, O. (2008). Porter's model of generic competitive strategies. Business Economics, 43(3), 55-64.

Pretorius, M. (2008). When Porter's generic strategies are not enough: complementary strategies for turnaround situations. Journal of Business Strategy.

Teeratansirikool, L., Siengthai, S., Badir, Y., & Charoenngam, C. (2013). Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Productivity and Performance Management.