Porter's Five Forces Model for Industry Analysis

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This essay is an attempt to apply the Five Forces Model for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979 that draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Within the ambit of Porter’s typology, this essay aims to analyze the attractiveness of industries for investment and seeks to identify their potential for change or adaptability within the context of the inherent constraints and opportunities which exist in any given organizational environment. To achieve the above, a thorough introductory outline of the Five Forces Model will be laid out, citing its content and its pros and cons as a tool for analysis and business strategy in the organizational environment. Concomitantly, relevant concepts shall be defined in order to generate more understanding of the subject matter. A case study of the mobile telecommunications sector will be carried out in order to contextualize the topic and put issues into perspective. A conclusion will then be drawn from the discourse. To begin with, any attempt to define a concept requires an investigation into its characteristics. For the term ‘organization’, it is perhaps easier to say what it is not rather than what it is. However, according to Porter, Lawler and Hackman (1975) (quoted in ABE (2010:10), organizations have the following attributes: they are composed of individuals and groups; they have some degree of permanence (they are going concerns); they exist in order to achieve certain goals; and they involve specialization and require rational control and co-ordination. In other words, therefore, organizations are social entities that involve two or more people. Secondly, they are permanent in the sense that their existence is not usually tied to the achievement of one goal. However, some organizations such as pressure groups cease to exist after the attainment of one particular objective. An example is the Red Card Campaign orchestrated by Father Frank Bwalya, a catholic priest, that was bent on de-campaigning the then ruling Movement for Multi-party Democracy (MMD). On the other hand, some organizations that may have started out with similar limited objectives continue to exist after they have achieved their objectives as they develop new ones. An example is the Oasis Forum, whose aim was to garner opposition to President Chiluba’s attempt to stand for a third term. Thirdly, organizations are distinguished from other social entities by virtue of the fact that they exist to achieve certain goals. However, this is a matter of degree in that not all members may know or agree on what the goals are. The more explicit and specific the goals of a social grouping are, the more likely it is considered to be an organization. The fourth characteristic of an organization is that it involves specialization and requires coordination. Labor is divided up in ways that are believed likely to positively contribute to the realization of organizational goals. Nonetheless, specialization requires that mechanisms for coordinating the various specialized activities are put in place. It must be noted that the degree of specialization and coordination varies between organizations with small ones (in terms of the number of people involved) having a less simpler form of specialization and coordination , usually by the owner, while large ones have a more sophisticated form. In view of the above, therefore, organizations may be defined as social entities engaged in a systematic and coordinated effort, persistently over a period of time, in pursuit of goals which convert resources into goods and services which are needed by the consumers. Sufficed to say this, organizations do not exist in isolation. They are part of the wider fabric of society in general and as such are influenced by, and to some extent may influence, the environment...
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