Porters Five Force Model

Topics: Manufacturing, Competitor analysis, Good Pages: 2 (699 words) Published: March 4, 2008
The process one would follow to analyze the key business activities that would sustain a competitive advantage for the given company XYZ, would be Porter's Five Force Model. The Five Force model gives focus to the external environment of the organization. It reveals the source of competition in an industry, and the external influence, including the threats and opportunities that an organization has to face in order to gain a competitive advantage. The Value chain on the other hand, focuses on the internal analysis of the business activities. In this section we will be briefly be discussing the factors of the model, those being the supplier power, the buyer power, the competitive rivalry, the threat of substitution and the threat of new entrants.

To begin with, we shall look at the supplier power. This indicates how easy it would be for suppliers to push up prices. This is driven by the number of suppliers available, the uniqueness of their product or service, and their strength and control over the company. Basically, the less supplier options that the company has, the more power the supplier has over the company. With the XYZ company, they would not have a major problem as their purchases would consist of raw materials which they themselves would convert into end products.

The second factor of discussion is the buyer power. This gives an indication of how easy it would be for the buyer to force the prices down. This is driven by the number, and importance of each buyer to your business. Also, the cost of them switching to another firm also comes into play. Exceptional quality and after-sale service is important in XYZ, as it is a manufacturing firm. Should their product or service be regarded as inferior, buyers would not hesitate to go to other firms to purchase their goods. To maintain a steady consumer base, customer consciousness is vital.

The third factor is the competitive rivalry in the industry. This all depends on the number and capability...
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