Student

Nokia was once a market leader in mobile phone industry which occupied over 70% of worldwide market share. With Apple launching new models and technology of phones, Apple is now perceived as the most welcomed mobile phone brand. General Motor has built a long established reputation as a leading automobile manufacture. Following Japanese brands entered into the global market, General Motor lost its market significantly and eventually become bankrupt during the financial crisis in 2008. Rationale behinds these stories are the failure to adapt successful corporate strategies which generate competitive advantages to them to win against rivalry. Porter emphasises the importance of a unique strategic position in the market while another view focus on the firm’s own resources as its core competence to sustain itself in the market.

Positioning Approach

Positioning Approach was suggested by Porter during the nineteen eighties which stated that market structure plays an important part in determining a firm’s profitability. Market structure therefore influences the conduct and strategy of a firm and directly affects the firm’s performance. On this structure – conduct – performance relationship, Porter identified 5 forces namely threat of entry, power of supplier, degree of rivalry, power of buyer and threat of substitutes to understand the industry environment and suggest strategies to be adopted according to this environmental analysis to achieve a competitive industry position. His suggestion is named as 5 Forces model which provides a means of analysing the strength of the influence and power of these forces. The stronger the competitive force in the market, the higher the threat to the profitability of a firm.

1. Threat of entry

Threat of entry represents the strength of industry barrier for potential new competitor to enter into the industry. This factor is determined by the level of entry costs and cost advantages to be enjoyed by the newcomers. Entry