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Strategy Today Essay

956 words - 4 pages

Michael Porter’s Five Forces Model (5FM) was published in 1980 and since then has been used extensively to analyse the environment that a firm is operating in or intends to enter. The author uses an extra force which was added to the original 5 by the then C.E.O of Intel Andrew Grove. This force was called the complementors which Prasad feels has enhanced the model further. Complementors refer to the role played by external factors on a firm’s environment. For example the role played by the Irish government in the Irish airline industry with the control of the airports by the Dublin airport Authority (DAA) and not allowing a private company (Ryanair) build a new terminal at Dublin airport. ...view middle of the document...

The author confirms his assertion that culture and history play a vital role when using the 5FM to ascertain a firm’s strategic positioning in relation to entering a new market by using examples from history which affects a given market and determine the level of intensity of the different forces.
Some examples of what the author talks about include;
For the bargaining power of buyers he uses the example of the United Kingdom and the protestant ethic in relation to spending habits. Protestantism, he believes, lead to low levels of consumption and high levels of saving which helped to finance the industrial revolution in England. This has caused a high level of intensity in the bargaining power of buyers force. This is the reason for the proliferation of discount stores on the high street in Britain today and the success of supermarket chains like Asda because of the need to satisfy penny pinching British consumers and a lack of loyalty to a particular store.
In the rivalry category he uses the example of Japan and a finance minister from 1880 who tried to fix the problem of high levels of inflation occurring at the time by fiscal policy which lead to a pattern of boom and bust cycles in the economy. Taxes were introduced whereby cash had to be used to pay the tax liability instead of rice. Landowners lost their holdings to more successful neighbours who had lent them money and what followed was a weeding out of the weaker enterprises. It is this phenomenon that has lead to high level of rivalry in Japan today and their use of the generic strategy of cost leadership rather than on differentiation of the product.
He talks about the lack of choice in Indian supermarkets and relates it back to Gandhi and his theories on consumption. This example is used to illustrate...

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