Porter’s five forces strategy is premised on the view that five forces that influence the structure of an industry and that an awareness of the five forces and the shaping of strategy consistent with the five forces help a firm become profitable and less vulnerable to attack (Porter 2008, 1st paragraph). Porter (2008) described the said five forces in terms of Figure 1.According to Porter (2008, 2nd paragraph), the key tasks of the strategist is to understand and cope with the competition. Consistent with Figure 1, Porter (2008, 2nd paragraph) clarified that competition, however, goes beyond industry rivals and covers four other competitive forces: potential entrants, bargaining power of buyers, the threat of substitutes, and bargaining power of suppliers. An extended rivalry results from the five forces (Porter 2008, 2nd paragraph). In sum, the five forces strategy calls for decreasing the rivalry among industry players, reducing the threat of new entrants, decreasing the bargaining power of customers, decreasing the threat of substitutes, and decreasing the bargaining power of customers (Reckiles 2001, p. 1).In dealing with rivals, Porter’s five forces strategy posited that a firm can choose one of the following alternatives or strategic moves: changing prices, product differentiation, creatively building channels of distribution and exploiting relationships with suppliers (QuickMBA 2007, p. 3). In addressing the threat of new entrants, a firm can tap laws or government, use patents and proprietary knowledge and rights, promote specificity for related products, and build up internal economies of scale wherein production costs are at minimum QuickMBA 2007, p. 9-10).In dealing with the bargaining power of customers, Porter’s five forces strategy calls for diversification of markets, forward integration or ability to go into distribution and retailing, institution of measures that can make itcostly for buyers to switch to other suppliers, fragmenting buyers and making sure that they have no influence on products and prices, and creating measures to have control over buyers purchases (QuickMBA 2007, p. 7-8). In dealing with the threat of substitutes, a firm can tap technology as well as use price competition (QuickMBA 2007, p. 5-6). Finally, in dealing with supplier power, a firm can standardize its product, and implement backward integration (QuickMBA 2007, p. 7).
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