Includes assessment. Must post first. Michael Porter (1980) created a strategic
ID: 349358 • Letter: I
Question
Includes assessment. Must post first. Michael Porter (1980) created a strategic analysis called 5 Forces. Using your chosen organization, use the analysis tools and determine the intensity of the competition and if it is profitable or if it will be profitable. Please provide all 5 Forces as depicted in exhibit 6.1 on page 33 of your textbook. Explain your reasoning please. Do not reference your book, it is a tool to help you work through the information from your healthcare source. Seek information through your healthcare organization and or news articles and journals. Write in third person and do not use “I think or in my opinion”. Keep your information factual and follow APA standards on referencing. Please use the NAU Library APA guide for assistance. Requirements for posting in your discussion boards this quarter are listed in each discussion and as an attachment in the library under discussion forums. It is important to understand what is acceptable and what is forbidden. APA standard rules apply so be sure you review them! The forbidden list is located in your course library. Each discussion must be researched and do not use the book as a reference as we all have the same information and this is redundant posting. A minimum of 250 words are necessary for your first post. Two responses are required to fellow students be sure you watch for commentary from your instructor and respond accordingly. A minimum of three sentences per response please. "Great and good job" does not qualify as a sentence or a response. Do not use your book to as a reference to the discussion board as it is redundant and everyone has the book. Always seek an outside resource for discussion posts. Use an outside resource for your initial post. Seek information through healthcare news articles and journals. Follow APA standards on referencing. Please use the NAU Library APA guide for assistance. Use full APA standards for all references. A URL reference link post alone will lose 12 points per discussion before grading. Be professional in your grammar and punctuation use spell check and capital letters where needed. Points lost if not professional.
Explanation / Answer
Michael Porter’s Five Forces
Michael Porter’s five forces is a model used to explore the environment in which a product or company (or business unit) operates. Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths. Frequently used to identify an industry's structure to determine corporate strategy, Porter's model can be applied to any segment of the economy to search for profitability and attractiveness.
Five forces analysis looks at five key areas mainly the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry. Porter’s Five Forces Model, also known as the competitive forces model, is a competitive analysis model that was developed by Michael Porter.
The purpose of Porter’s Five Forces Model is to determine the profit potential of a market i.e. business sector. According to Michael Porter each business sector is potentially influenced by five factors that he refers to as forces. The combined power of Porters Five Forces determines the eventual profit potential of the business sector.
The five forces are:
· Supplier power
· Buyer power
· Threat of substitutes and complementary goods
· Threat of new entrants on the market
· Competitive rivalry
Competition in the Industry
Potential of New Entrants Into an Industry
A company's power is also affected by the force of new entrants into its market. The less time and money it costs for a competitor to enter a company's market and be an effective competitor, the more a company's position may be significantly weakened. An industry with strong barriers to entry is an attractive feature for companies that would prefer to operate in a space with fewer competitors.
The easier it is for new companies to enter the industry, the more cut-throat competition there will be. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include:
· Existing loyalty to major brands
· Incentives for using a particular buyer (such as frequent shopper programs)
· High fixed costs
· Scarcity of resources
· Government restrictions or legislation
· Entry protection (patents, rights, etc.)
· Economies of product differences
· Brand equity
· Switching costs or sunk costs
· Capital requirements
· Access to distribution
· Absolute cost advantages
· Learning curve advantages
· Expected retaliation by incumbents
Power of Suppliers
This force addresses how easily suppliers can drive up the price of goods and services. It is affected by the number of suppliers of key aspects of a good or service, how unique these aspects are, and how much it would cost a company to switch from one supplier to another. The fewer the number of suppliers, and the more a company depends upon a supplier, the more power a supplier holds
This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a company’s margins and volumes, then they hold substantial power. Here are a few reasons that suppliers might have power:
· There are very few suppliers of a particular product
· There are no substitutes
· The product is extremely important to the buyer, they cannot do without it
· The supplying industry has a higher profitability than the buying industry
· Supplier switching costs relative to firm switching costs
· Degree of differentiation of inputs
· Presence of substitute inputs
· Supplier concentration to firm concentration ratio
· Threat of forward integration by suppliers relative to the threat of backward integration by firms
· Cost of inputs relative to selling price of the product
Power of Customers
This specifically deals with the ability customers have to drive prices down. It is affected by how many buyers or customers a company has, how significant each customer is, and how much it would cost a customer to switch from one company to another. The smaller and more powerful a client base, the more power it holds.
Here are a few reasons that customers might have power
· Small number of buyers
· Purchases of large volumes
· Switching to another (competitive) product is simple
· The product is not extremely important to the buyer, they can do without it for a period of time.
· Customers are price sensitive
· Buyer concentration to firm concentration ratio
· Bargaining leverage
· Buyer volume
· Buyer switching costs relative to firm switching costs
· Buyer information availability
· Ability to backward integrate
· Availability of existing substitute products
· Buyer price sensitivity
· Price of total purchase
Availability of Substitutes
Competitor substitutes that can be used in place of a company's products or services pose a threat. For example, if customers rely on a company to provide a tool or service that can be substituted with another tool or service or by performing the task manually, and if this substitution is fairly easy and of low cost, a company's power can be weakened.
What is the likelihood that someone will switch to a competitive product or service? If the cost of switching is low, then this poses to be a serious threat. Here are a few factors that can affect the threat of substitutes:
· Buyer propensity to substitute
· Relative price performance of substitutes
· Buyer switching costs
· Perceived level of product differentiation
· Fad and fashion
· Technology change and product innovation