MARUTI SUZUKI INDIA LIMITED.
Module: Management and business environment
Tutor: Mary Thaiya
Sandeep kumar. Gajapuram
INTRODUCING MICHAEL E.PORTER:
Michael E.Porter is generally recognized as the modern strategy field, and has been identified as the world’s most influential thinker in many rankings and surveys on management and competitiveness.He is the professor at Bishop William Lawrence University based at the famous Harvard Business school. In 2001, Harvard Business School and Harvard University jointly created the INSTITUTE FOR STRATEGY AND COMPETITIVENESS, dedicated to furthering Professor Porter’s work.
In the year 1979 Professor Porter of Harvard Business School developed a framework of five forces for the analysis and business strategy of an industry .These five forces determine the competitive intensity in an industry in all aspects that drives the industry.
PORTER’S FIVE FORCES:
The diagram represents the five forces that drive an industry. The main aspects of the five forces framework are as follows, INDUSTRY RIVALRY:
Rivalry is the main force that drives the industry as the competition arises between the firms. All the firms strive for competitive advantage over their rivals. The intensity of rivalry is determined by the industry concentration. Generally high concentration ratio determines that the high market share is held by large firms and competitiveness is less as it is like monopoly. If the concentration ratio is low then it is characterised by many rivals and none of them dominates the market as the competition is high. In gaining an advantage over rivals firms choose some strategies like changing prices, improving product differentiation, using creative channels of distribution and exploiting relationships with suppliers to improvise quality standards. There are some factors that influence industry rivalry. They are as follows, * A large number of firms in same industry increase rivalry. * Slow market growth influence rivalry among firms.
* High fixed costs increases rivalry as the firms strive to sell all the products and firms fight for the market share. * High storage costs also increase rivalry as the competition for customer’s increases. * Low switching costs influence rivalry as the customer can easily move from one product to another and companies try to capture customers. * Low levels of product differentiation intensify rivalry among companies. * Strategic stakes are high when a firm is losing market position or has capacity to gain as this intensifies rivalry. * High exit barriers intensify rivalry.
* Diversity in rivals also influences rivalry.
* Increase in new firm’s entry intensifies rivalry as the saturation of the industry takes place.
THREAT OF SUBSTITUTES:
In this context porter analyses the threat of substitutes as the main force.. Substitutes are the products of almost same features of other industries .Threat of substitutes arises when a product demand is affected by the change in the price and additional features for the same kind of product. Price variation mainly drives the threat of substitutes as the customer has many alternatives of same kind. In this kind of force example can be given of a mobile networks industry as the user has many choices and can also switch easily and thus the competition intensifies a lot.
Buyer power has a significant impact on an industry striving to dominate the...