1. The model described by Michael Porter is the five forces of competitive advantage is a
simple framework for the evaluation of the competitive strength and status of an
organization. The cost should not be the only-one criterion to influence strategy. There
are other forces also. The five models are classified into horizontal and vertical. There are
three horizontal forces possible threats of new competitors, threats of existing rivals, and
two vertical forces i.e., bargaining power of suppliers and customers. Horizontal threats
are related to external sources and vertical threats are combined with vertical. The
questions to be raised for any organization while making strategies can be derived from
these five forces. At how ease another competitor can enter the same industry, whether
there are other rivals giving the same offer to the customers, buyers, and suppliers’ power
of bargaining easy or not? and the probability of the customer switching to a similar
product. These questions should be answered which will reflect the strength of a
company’s existing scenarios and its future scenario.
2. The main evidence he provides is an example from the aviation industry. There are
threats of new entrants in the industry. In the aviation industry, large amount of
resources especially financial are needed, the time to launch is large, and the requirement
of a solid customer base. However, this threat is low. Similarly, the bargaining power of
buyers is medium. There are various airlines to choose from, now tickets can be bought
from apps, online websites, and agents. Different facilities are there for the passengers in
the airline ranging from economy to business class. In the bargaining power of suppliers,
is low. To manufacture an airplane, it cost more than $100 million with experienced and
dedicated skilled manpower. Now, there are only two major companies ruling the market,
Airbus and Boeing for large planes. In terms of the threat of substitute products, level of
threat is low. Passengers won’t shift to cars and buses to travel for long durations. Only
train can be a risk but it’s low. While , the level of threat is high for the rivalries between
competitors in the same aviation industry. Now, in Canada, flair airlines are offering low
fares in comparison to others. The giant airlines’ companies have more leverage and
manipulate the consumers. Small companies are either merged or pushed out.
3. Yes, I agree that the five forces models in strategic planning are huge and can be applied
to every business environment. These models will assist in visualizing new strategies and
understanding the level of profitability and fierce competition among the companies. I
also believe that these models can also be integrated with SWOT analysis and PESTLE.
These 3 models will give a clearer picture while making strategies and implementing and
knowing the strengths and weaknesses. The five forces are more useful when there are
subject experts from all the sectors of the company such as sales, marketing, customer
care, product managers etc. These can be utilized whenever there is or will be fierce and
cutting-edge competition among competitors. To have sustainable profits for any
company or organization, the five forces model should be applied. The identification of
best practices and knowing the shortcomings and limitations can be crucial for the future
too.