Preview

Porter's Five Forces - International Application

Better Essays
Open Document
Open Document
962 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Porter's Five Forces - International Application
Michael Porter’s Five Forces – International Application
Michael Porter, a Harvard professor, developed his Five Forces model in 1979 to analyze business competition and factors that can minimize profit (Porter, The Five Competitive Forces that Shape Strategy, 2008). Porter theorized that businesses looked at competition too narrowly, failing to consider other forces that contribute to profitability. The Five Forces Model examines competition for profits in regard to buyers, existing competitors, new entrants into the market place, suppliers, and the threat of substitute services or products. The model can be applied to any type of business, operating in any industry and market place. Even though the model was developed more than 35 years ago, it remains a viable tool today, especially in the global marketplace. Businesses considering entry into a foreign market may utilize Porter’s Five Forces model to evaluate that attractiveness of the market (Stahl & Grigsby, 1997).
Buyers are considered in regard to the demands they place on businesses to provide more value for less money. Buyers should be evaluated for price sensitivity and bargaining power. Buyers can be price sensitive if the product or service is a large percentage of their budget. For example, a consumer looking to purchase a refrigerator vs. a toaster, the refrigerator is a much larger percentage of the household budget and therefore price sensitivity is higher. If the buyer can save, or even make money with the product or service, price sensitivity will be lower (Porter, The Five Competitive Forces that Shape Strategy, 2008).
Buyers have a high level of bargaining power if the product or service is undifferentiated from the competitors (Porter, The Five Competitive Forces that Shape Strategy, 2008). Global companies offering foreign products or services new to the local consumers may enjoy the benefit of a uniquely differentiated product previously unavailable to the region. In this case



References: Denning, S. (2012). Even Monitor Didn 't Believe in Five Forces Analysis. Retrieved August 10, 2014, from Forbes.com: http://www.forbes.com/sites/stevedenning/2012/11/24/even-monitor-didnt-believe-in-the-five-forces/ Porter, M. (2010). Porter 's Five Forces- A Model for Industry Analysis. Retrieved August 9, 2014, from QuickMBA: http://www.quickmba.com/strategy/porter.shtml Porter, M. (2008). The Five Competitive Forces that Shape Strategy. Retrieved August 9, 2014, from Harvard Business Review: http://hbr.org/2008/the-five-competitive-forces-that-shape-strategy/ar/1 Recklies, D. (2001, June). Porter 's 5 Forces. Retrieved August 10, 2014, from TheManager.org: http://www.themanager.org/models/p5f.htm Stahl, M. J., & Grigsby, D. W. (1997). Strategic Management - Total Quality and Global Competition. Oxford, UK: Blackwell Publishers Ltd.

You May Also Find These Documents Helpful

  • Powerful Essays

    Porter’s five forces is a framework for the industry analysis and business industry development developed by Michael E. Porter of Harvard Business School in 1979.…

    • 2072 Words
    • 9 Pages
    Powerful Essays
  • Good Essays

    Coffee and Broadway Cafe

    • 662 Words
    • 3 Pages

    Michael Porter’s Five Forces Model is a useful tool to aid organizations facing the challenging decision of entering a new industry or industry segment. The Five Forces Model helps determine the relative attractiveness of an industry and includes:…

    • 662 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Cohesion Case Broadway Cafe

    • 6472 Words
    • 17 Pages

    QuickMBA.com (1998). Porter 's Five Forces: A Model for Industry Analysis. Retrieved 7 May 2011 from QuickMBA.com: http://www.quickmba.com/strategy/porter.shtml…

    • 6472 Words
    • 17 Pages
    Powerful Essays
  • Good Essays

    External analysis

    • 1498 Words
    • 6 Pages

    According to Hill and Jones, the five forces model serves the purpose to identify opportunities and threats in the external business environment, by analysing “competitive forces” (Hill & Jones, 2012, p. 42). Once created by Michel E. Porter this particular framework functioned as a useful tool for managers to approach the external analysis.…

    • 1498 Words
    • 6 Pages
    Good Essays
  • Good Essays

    Porter's Five Forces Model includes the following: in the center is competition, on the left are suppliers, on the right are customers, on the top is substitute products and finally on the bottom is entry barriers.…

    • 1312 Words
    • 6 Pages
    Good Essays
  • Good Essays

    Michael Porter’s Five Forces Model is a model used to analyze a particular environment of an industry. An industry is a group of firms that market products which are close substitutes for each other, such as the automobile industry. According to Porter, there are five forces that determine an industry’s long-run profitability and attractiveness. These five competitive forces are the threat of entry of new competitors, or new entrants; the threat of substitutes; the bargaining power of buyers; the bargaining power of suppliers, and the degree of rivalry between existing competitors.…

    • 698 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Harley Case Study

    • 7153 Words
    • 29 Pages

    Porter, M.E. (2008, January). The five competitive forces that shape strategy. Harvard Business Review, Reprint R0801E, pp. 1-18.…

    • 7153 Words
    • 29 Pages
    Powerful Essays
  • Powerful Essays

    Waterstones 5 Forces

    • 1538 Words
    • 7 Pages

    For university students who need to read widely, books are undoubtedly one of the most commonly used items. However, the choice of reading methods and approaches is not only a concern for readers, but also a key factor for the survival of direct and indirect book sales stakeholders. As a significant brand in the UK book market, Waterstones’ status reflects the actual situation of the entire industry. This essay will analyze the development and strategies of Waterstones. To make the discussion clear, this essay will be divided into three parts: Firstly, an introduction to the history and development of Waterstones.…

    • 1538 Words
    • 7 Pages
    Powerful Essays
  • Satisfactory Essays

    The strength of each one of the five forces is a separate function of the the industry structure, but considered together affect prices, levels of investment for competitiveness, market share, potential profits, profit margins, and industry share. The key to success in an industry is to…

    • 609 Words
    • 3 Pages
    Satisfactory Essays
  • Better Essays

    Porters five forces analysis looks at factors outside of an industry that influence the nature of competition within it, the way in which firms compete and the industry’s likely profitability conducted by the model.…

    • 1179 Words
    • 5 Pages
    Better Essays
  • Powerful Essays

    General Electric

    • 8692 Words
    • 35 Pages

    Porter, M. E. 1979, ‘How competitive forces shape strategy’, Harvard Business Review, March / April, 57, pp. 137 - 45.…

    • 8692 Words
    • 35 Pages
    Powerful Essays
  • Satisfactory Essays

    The Five Forces Model was developed by Michael Porter in 1979 as a tool to…

    • 632 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Swot and Ipest Analysis

    • 2051 Words
    • 9 Pages

    What is Five Forces Analysis? Describe each in detail and use your own small example to illustrate.…

    • 2051 Words
    • 9 Pages
    Good Essays
  • Good Essays

    Porter's Five Forces Model

    • 5824 Words
    • 24 Pages

    Five forces is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. Michael Porter is a professor at Harvard Business School andis a leading authority on competitive strategy and international competitiveness.Michael Porter was born in Ann Arbor, Michigan.…

    • 5824 Words
    • 24 Pages
    Good Essays
  • Good Essays

    Using the Porters five + 1 forces model which is a powerful analysis tool, corporate managers are empowered to better analyse the current position of the industry in which they are operating in an easy to understand way which is well structured. In strategic management, it is critically essential for managers and directors of firms operating in the same industry to understand the five competitive forces acting on and between organizations in the same industry. By understanding these forces, they will place themselves in a better position to determine the attractiveness of that industry.…

    • 1155 Words
    • 5 Pages
    Good Essays