Ur Umuc Stage 1 Essay

The following analysis of Porter’s 5 Forces Model will help in determining the threats that my be present now or in the future and help determine opportunities and decisions regarding the marketing plan.

Michael Porter wrote about five forces affecting the profitability and viability of companies. The five forces are existing competitors, new entries into the market, substitute products, bargaining power of customers, and the bargaining power of suppliers. (quickmba)

Porter’s Five Forces is a framework that consists of five competitive forces, threat of entry, power of supplier and buyer, threat of substitution and competitive rivalry. These forces facilitate the analysis of the task environment of an industry or company (Wheelen and Hunger, 2009).

Porter's Five Forces is a simple but powerful tool that consist of 5 different forces to understand the competitiveness of your business environment, and for identifying your strategy's potential profitability. The five forces are degree of rivalry, threat of entry, threat of substitutions, buyer power, and supplier power. Each force is helpful in their own way to get to know your rivals a lot better and get to know what can happen in your market.

Looking at the figures by sales revenue, we can see that the Corpus Christi Athletic Club is number one as it relates to annual revenues. Gold’s Gym is fourth among key competitors with annual revenues of $66,000. Although Gold’s Gym is last in this table, looking at the top U.S. Cities and Franchises in the Health Industry Market, they are ranked number two with average revenues of $96 million.

As with any guideline model, Porter’s Five Forces Model has certain limitations as well. First, the model was created quite a time ago, and the dynamics of the economy have changed. When the model was created, the name of the game was profitability and survival. In today’s global climate, industries can be unpredictable. The model is best used in a simple economic structure. Companies that have many products, suppliers, and customers may not fit into all of the categories and risk factors presented by the five forces model. Lastly, technology being what it has become today, the forces model would be grueling to re-evaluate every time technological advances come through (Max-Adler 2012).

Many business leaders today may struggle with implementing the perfect strategy for their business. There will be different strategies for different businesses. What works for one business may not be the best option for another business. It is up to the business leaders to do their research to find the strategy that would work best for what the business wants to accomplish. In corporate America, there will always be people or a strategic team looking for ways to stand out from the competition. Standing out from your competition allows your business to thrive and succeed. This is what brings the customers in to your business. According to the Capsim simulation, there are 6 strategies that many businesses utilize: broad cost leader, broad differentiator, niche cost leader, niche differentiator, cost leader with product lifestyle focus and differentiator with product lifecycle focus. I will give a little insight into each of these strategies along with how these strategies will fit into your Christian Worldview.

Porter 's Five Forces Model is a critical instrument to break down an outer aggressive environment of the business. The model incorporates threat of entry, the threat of rivalry, the threat of suppliers, the threat of purchasers and threat of substitutes.

The Porter Five forces analysis is a structure for business management developed by Michael Porter in 1979. It uses concepts developed in Industrial Organization economics to derive five forces that determine the attractiveness of a market. Porter referred to these forces as the microenvironment, to contrast it with the more general term microenvironment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. This concept involves a relationship between competitors within an industry, potential competitors, suppliers, buyers and alternative solutions to the problem being addressed. A change in any of the forces normally requires a company to re-assess the marketplace.

This model was articulated for the first time by Michael Porter in 1979 in his successful record-breaker book named “How competitive forces shape strategy” (Porter, p.78). Five forces are illustrated in following picture.

The Porter`s five forces are threats of new entrants, the bargaining power of buyers ,product substitution and intensity of rival of rival among competitors .These forces measure the competitiveness of the market and also helps the company to identify strategies to use to penetrate such and gain market share.

Another generic competitive strategy is broad differentiation strategies. According to Thompson, Strickland, and Gamble, in “Crafting and Executing Strategy”, broad differentiation strategy is seeking to differentiate the company’s product offering from rivals in ways that will appear to a brad spectrum of buyers. A company attempting to succeed through differentiation must study buyers’ needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for. Then the company has to incorporate buyer-desired attributes into its product or service offering

The 5 forces are the environmental forces that impact on the companies ability to compete in the given market. The purpose of 5 forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

5 forces analysis definition: This model identifies and analyzes 5 competitive forces that shape every industry, and helps determine and industry’s weaknesses and strengths.

Porter’s 5 Forces analysis is a commonly used business theory that identifies the 5 competitive forces of an industry. By identifying and analysing these forces you can determine an industries weaknesses and strengths. Porter recognised the 5 forces in most business markets to be internal rivalry, entry, substitutes and compliments, supplier power and buyer power.