Management Information system
- 5. A company can survive and succeed in the long run only if it successfully develop strategies to confront five competitive forces that shapes the structure of competition in the industry. In Michael Porter’s classic model of competitive strategy , any business that wants to survive and succeed must develop and implement strategies to effectively counter The rivalry of competitors within its industry The threat of new entrants into an industry and its markets The threat posed by substitute products which might capture market shares The bargaining power of customers The bargaining power of suppliers
- 7. Competitors share a natural ,and often healthy ,rivalry. This rivalry encourages and sometime requires a constant effort to gain competitive advantage in the market place. The threat of new entrants also expends significant organizational resources. Not only do firms need to compete with the other firm in the market place, but they must also work to create significant barriers to the entry of new competition. This competitive force is often a difficult one to manage because the internet has created many ways for a new entrant to enter the market place quickly and with relatively low cost of entry . The threat of substitute is another competitive force confronting a business .the effect of the force is seen almost daily in a wide variety of industries .it is often at its strongest during period of rising cost or inflation . Eg :when airline prices get too high people substitute car travel on their vacation
- 8. Finally a business must guard against the often opposing forces of customer and supplier bargaining powers. If the customer bargaining power get too strong they can drive price to unmanageably low level or simply refuse to buy the product or services . If the key supplier bargaining power get too strong it can force the price of goods and services to unmanageably high levels or can simply starve a business by controlling the flow of materials essential to the manufacture of a product
- 10. The business can counter the threats of competitive force that they face by implementing five basic competitive strategies Cost leadership strategy Becoming a low cost producer of product and services in the industry, or finding ways to help its supplier or customer reduce their costs or to increase the costs of their competitors. Differentiation strategy Developing ways to differentiate a firm’s products and services from competitors or reduce the differentiation advantages of competitors . This may allow a firm to focus its products or services to give it an advantage in particular segment or niches of a market
- 11. Innovation strategy Finding new ways of doing business. This may involve the development of unique products and services, or entry into unique market or market niches. It may also involve making radical changes to the business processes for producing or distributing products and services that are so different from the way a business has been conducted that they alter the fundamental structure of an industry. Growth strategies Significantly expanding a company’s capacity to produce goods and services, expanding into global markets, diversifying into new product and services , or integrating into related product and services
- 12. Alliance strategies Establishing new business linkage and alliances with customer, suppliers, Competitors ,consultant and other companies. These linkages may include mergers ,acquisitions ,joint venture, forming of “virtual companies “or other marketing ,manufacturing ,or distribution agreements between a business and its trading partners