International Application with Porter’s Five Forces Model
International Application with Porter’s Five Forces Model
Casey M. Allen
American Military University – BUSN601
Abstract
Porter’s Five Forces Model was examined to provide insight into how certain forces can have a direct impact on an industries ability to make a profit and survive competition. Specifically, Porter’s model was determined to be especially important when applying its principles to international strategy and the operation of an overseas global business. The reason for this importance includes the ability to gauge rivalry, competitors, supplier availability and market shares held by existing industries.
Introduction
Porter’s Five Forces Model is a unique way in which industry leaders can gauge both internal and external factors that may directly impact their business by allowing them to recognize forces that can be used to influence competition between firms. Porter’s Model provides insight into several reasons why variances exist in the market and items such “risk-adjusted rates of return” are not constant as would be expected from the model of pure competition. (Porter, 2010) Specifically, Porter’s model displays how rivalry along with four other specific forces direct impact business competition and operations. (Porter, 2010) This is important because rivalry amongst firms in an industry is the driving force that affects factors such as the rates in which a firm might charge for their product, as well as the percentage of market share in the industry. Rivalry can be utilized in a way that can drive competition as well as a technique in which existing firms can protect their current operations by placing “barriers to entry” as a way to inhibit new entrants. (Porter, 2010)
It is especially important for businesses that operate in a global market to recognize each of the five forces that might impact operations. Indigenous markets and cultures have differing effects on an industry at a local level. What might be a popular product on one
Casey M. Allen
American Military University – BUSN601
Abstract
Porter’s Five Forces Model was examined to provide insight into how certain forces can have a direct impact on an industries ability to make a profit and survive competition. Specifically, Porter’s model was determined to be especially important when applying its principles to international strategy and the operation of an overseas global business. The reason for this importance includes the ability to gauge rivalry, competitors, supplier availability and market shares held by existing industries.
Introduction
Porter’s Five Forces Model is a unique way in which industry leaders can gauge both internal and external factors that may directly impact their business by allowing them to recognize forces that can be used to influence competition between firms. Porter’s Model provides insight into several reasons why variances exist in the market and items such “risk-adjusted rates of return” are not constant as would be expected from the model of pure competition. (Porter, 2010) Specifically, Porter’s model displays how rivalry along with four other specific forces direct impact business competition and operations. (Porter, 2010) This is important because rivalry amongst firms in an industry is the driving force that affects factors such as the rates in which a firm might charge for their product, as well as the percentage of market share in the industry. Rivalry can be utilized in a way that can drive competition as well as a technique in which existing firms can protect their current operations by placing “barriers to entry” as a way to inhibit new entrants. (Porter, 2010)
It is especially important for businesses that operate in a global market to recognize each of the five forces that might impact operations. Indigenous markets and cultures have differing effects on an industry at a local level. What might be a popular product on one
References: Gomolski, B. (2001). Going Global [Some lessons from eToys and Yahoo that might help you]. Infoworld, 26(6), 72. Porter, M. (2010). In Quick MBA (Ed.), Porter 's Five Forces. Retrieved June 5, 2013, from Quick MBA Web site: http://www.quickmba.com/strategy/porter.shtml