We turn our attention to the company’s external environment: the industry in which the company operates and the competitive forces that surround the company from the outside. Michael Porter’s famous five force model aims to enable managers not only to understand their industry environment but also to shape their company’s strategy. As a rule of thumb, the stronger the five forces, the lower the industry’s profit potential—making the industry less attractive for companies.
Upon successful completion of the course material, you will be able to:
• Apply Porter’s five forces model to understand the profit potential of a company’s industry.
• Video: http://www.youtube.com/watch?v=mYF2_FBCvXw
The five forces model is one of the most widely used tools in strategy. Michael Porter wrote his original work on the subject over 30 years ago. However, he updated this work in 2008 and you will watch the video listed in the resources section for more details on the updated model. In this assignment, you will evaluate the strength of each of Porter’s five forces within three industries.
Read Chapter 3. Pay particular attention to Section 3.2 and pages 73-90 of your textbook, which explains Porter’s Five Forces Model. Additionally, watch the video link listed in the resources section of this workshop. The video is an interview with Michael Porter explaining the model.Use Use the following chart to organize your evaluation to analyze one of the following three industries: cruise line (i.e. Carnival, Royal Caribbean), big-box hardware stores (i.e., Lowe’s, Home Depot), or automobiles (i.e., Toyota, Ford). Pick one of the three to analyze. For the industry you selected, evaluate the strength of each of Porter’s ﬁve forces, as well as complements, by ﬁlling in the chart below. Articulate why you feel a particular force is high, medium, or low and why. Refer to Exhibit 3.5, The Five Forces Competitive Analysis Checklist on page 89, to guide your analysis. Industry Forces High? Medium? Low? Why? Threat of new entrants Power of buyers Power of suppliers Power of substitutes Rivalry among competitors Complements Navigate to the threaded discussion, submit your completed chart and answer the following questions: a. After your overall assessment of the industry you selected, is it likely to be highly proﬁtable? Explain your rationale for the ranking. Defend your answer with a comprehensive evaluation that demonstrates clear, insightful critical thinking.Your initial response should be 200 to 300 words in length, include two academic resources that are properly cited. PART 2 Now conduct a critical analysis of a posting by two of your classmates who selected an industry different than the one you selected by the end of the workshop. a. In what areas do you agree or disagree with your classmates’ analysis? b. Explain your rationale for agreeing or disagreeing with your classmates. c. Each response should be at least 150 words each in length and cite two academic sources.
Five Forces Model