Porters five forces of competition
Under this model, porter mentioned threats of new entrants who may be interested in the same
business. New entrants affect market share, thus reduce profitability and increase costs of
marketing (Porter, 2008). New entrants also pose a threat since they may introduce a different
entry strategy that is inconsistent with existing firms. New entrants also may redesign, marketing
routs parallel to existing ones, and thus creating market related conflicts. Porters also looked
at the power of suppliers in the model as key drivers of business profitability, because they
influence supplies like raw materials and other services needed by firms, in order to produce.
Pricing of raw materials and other services is vital in determining the price of the finished
product. Suppliers determine the level of input thus affect production related overhead. Another
aspect of competition in the porters framework is the bargaining power of customers. Porter
insists that, customers can mount pressure on the firm to adjust its prices downward, particularly
in a price sensitive environment. This also involves buyers choice and preferences as well as the
purchasing power of such buyers. Threats of substitutes are also another factor that determines
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firms’ competitiveness according to porters theory. Under this, Porter was concerned with
possible product substitutes that can provide alternatives to customers in the event of price
variations. This reduces market attractiveness thus reduces firm’s profitability. At the center of
all these, Porters model also dwelt on competitive rivalry as one of the key aspects of the five
forces of competition. The number and capability of the competitors, determine the level of
market attractiveness that may affect market penetration and profitability of firms (Porter, 2008).
Application of Porter’s five forces of competition
This model applies to our company in many ways. We have to consider that as our company
seeks market expansion, there is likelihood of new entrants in the industry coming on board. In
the event they produce similar products at a lower cost, customers are likely to switch to these
alternatives, which is likely to affect our market share. We have also to consider that using
external website may reduce our direct physical contacts to our renowned customers as much as
it provides an avenue for new customers. On the other hand the bargaining power of these new
buyers may also affect our prices in the new market much as our production costs may reduced
through online marketing. The company also needs to consider the existence of rival firms that
may target our best customers by providing lower prices for similar products. This is because
our rivals will be able to monitor our strategies on our website are likely to employ counter
tactics to our strategies. The power of suppliers should come into the picture when developing
these strategies because expansion of the market may increase demand for raw materials thus
mounting pressure on suppliers to supply more. The power of these suppliers to bargain for
supplies also determines the pricing aspect in the both existing and new markets. Suppliers may
also be forced to seek alternative sources of raw as demand increases. These may come with
extra costs of obtaining these raw materials, which is likely to be passed to our firm. Expansion
may also come with the introduction of new suppliers. These suppliers may have different
strength and bargaining power. Our company will also require some time to build mutual trust
and good working relationships in the event of new suppliers. The cost of switching from one
supplier to another may adversely affect our firms profitability. This should therefore be put into
consideration, thus strategies should
Generic strategies applicable to Adventure Works
As our company embarks on the development of this strategic plan, in relation to its operational
changes, there is a need for new strategies. This can include adopting relevant generic strategies
developed by porter, in our scenario, adopting a focus strategy is key in our new direction. The
company needs to focus on our existing customers and other potential customers in Europe and
develop contacts with them. Focus strategy will enable us to concentrate on a narrow customer
segment with an attempt to achieve cost advantage. However, we need to employ a focus
strategy with an element of cost leadership given that the firm indents to utilize online
marketing; for this reason, there is need to monitor the implication of this online system on our
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distribution costs. Online business provides two important advantages that include reaching a
wide number of potential customers and reduces barriers that affect business (Rainer, Kelly, and
Cegielski. 2012). This strategy best fits our specialized business that revolves around bikes and
metals. This company needs to capitalize on existing customers needs with whom it has already
built good relationship and mutual. There is need to strength our regional sales teams as we
embark on our new plan. This can be done through mapping of customers in every region and
customization our website based on regions to suit the already existing systems. The focus
strategy will enable our company to concentrate on a market niche that we understand most. This
strategy is possible because of already specialized venture in bicycle and metals. Our company
will be able to capitalize on the existing customers based on our brand loyalty. In this case, as we
broaden our market scope, we have to consider our market niche that we are quite familiar with
before penetrating any new market. We also need to bring something new in the mix that will
enhance the attractiveness of our product to customers. When applying the focus strategy, the
aspect of cost leadership will not pose a major challenge because our company will rely on our
website as a key marketing tool when targeting bicycle buyers. Relatively, the company will be
able to reduce cost of distribution through the utilization of online marketing. Cost reduction will
also be realized across the value chain through engagement of specialized suppliers and market
agents across our company. Superfluous Activities in the value chain within the target segment
will also be eliminated through focus strategy. Cost leadership will also be necessary at this
point of time because broadening market entails penetrating other competitive environment,
however, we need to concentrate on existing customers as per contact our list, in this case our
company needs to understand market dynamics including the bargaining power of suppliers and
buyers before the aspect of cost leadership is prioritized. Much as other strategies like
differentiation may create brand loyalty in the market by reducing oversensitivity of customers
on prices, we have to consider that the company already has the best customers that it entails to
concentrate on during its expansion. The newly acquired Importadores Neptuno in Mexico,
provides a framework upon which networking and mapping of potential customers can easily
be achieved through our regional sales team. The focus strategy will be right for our company
to sustain and satisfy already existing customers, we shall also be able to clearly segment our
products in the new geographical regions in relation to renowned customer. Focus strategy is
built on the concept of serving a defined group of customer nitch exactly what our company
should look forward to achieve. Also to note is that focus strategy can help achieve
differentiation as well as the low cost advantage within a narrow market. The focus strategy will
also echo well with this company because of the understanding of customers unique needs and
market dynamics. This is because we have all along served our customers uniquely well,
according to the feedback we get from the hem.
Implementation Tactics
One of the most effective tactic we can use to achieve this is timing tactics. Douglas, John and
Essam (2012), p. 130 noted that moving earlier than competitors to introduce and sell new
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product or model makes an organization first mover while others will be early followers. While
we employ time tactics we must consider our resources, capabilities and competences. The
driving force in timing tactic is considering a market share as organization goal. OShaughnessy,
(1995), established that by using market share as a goal, a company either intends to protect its
market share or advance its market share. By use of a timing tactic, our firm will be able move
before competition, move with competition and move away from competition as provided by
OShaughnessy (1995) in his competitive timing direct matrix. Effectiveness of time strategy
will be determined by how we choose and prioritize our goals. Setting implementation goals
in terms of long term and short term will enable us to evaluate the progress and development
intervention approaches where necessary. This involves setting targets in relation to our current
position in the market and time of achieving these goals for evaluation purposes.
The competitive position tactic will also be key in the implementation of this strategic plan. We
need to position our initiative as market leader who will be followed by other competitors by
virtue of our customer base and their loyalty across our regional markets. More significant is
our level of technology that includes reaching our extensive markets through our website. The
competitive position tactic will make our competitors more of followers. Taking up competitive
approach will mean that, our company defends its position as market leaders within our
market scope through customer defensive tactics. It is good to understand that our expansion
majorly focuses on existing customers, thus losing even one of them will be detrimental to our
strategy. Douglas, et al.p. 134 noted that leaders are always vulnerable to attackers. In this
case, positioning ourselves as market leaders need the adoption of defensive tactics. Defensive
tactics entail to reduce the possibility of attack and reduce threat attacks to an acceptable
standard (Porter 1985b). One of the ways is protecting current market share through position
defense tactic by building fortification around our current position. By focusing our attention
on this strategic plan, our company will be able to position and maintain itself as leading firm in
manufacture and sole distributor of bicycles.
I will be glad to be part of the team that will oversee the smooth implementation of this strategic
plan when in place, and will always be available in case you need any of my input.