Anda di halaman 1dari 3

3) How relevant is porter five forces in helping firms to sustain competitive advantage

A firm is said to sustain competitive advantage if it has achieved above industry


average long run profitability. As it is an average, it is relative to peer performance
within the industry and the average is derived from the five forces that exist within the
industry. For instance the average in the case of pharmaceutical industry is higher
compared to airline industry because the competition is weak in former making it
more attractive than the latter. OK to here. Cautious OK to the next sentence. So to
understand the five forces, there is a need to analyse the environment and moreover
the firm should align itself with the environment (consonance-strategic fit) which
holds the key to determine the firm’s competitive advantage.

The external environment consists of forces outside the traditional organisational


boundary which form the context within which the organisation exists (Wheelan &
Hunger). The key environmental forces constraints the organisation ability to achieve
its aim and therefore requires a framework that systematically identifies the possible
constraints and a methodology to identify the key forces and prioritise it. According to
Porter (1990 certain of this date!) the industry structure framework helps to rapidly
identify the structural features that determine the nature of competition in an
industry./

Hence industry structure framework suggests five forces (threat of new entrants,
bargaining power of suppliers and buyers, rivalry among competitors, threat of
substitutes) of strategic competitive threat which determine the attractiveness of
industry. This industry structure determines strategic competitors who compete on
profit rather than products. Therefore the firm’s ROI is dependent on these forces and
if the competition is weak then ROI is high and vice versa. According to Porter the
strategic analysis includes
-understanding of industry structure through five forces and identifying key forces.
- identify the drivers for change like PLC or PEST
- Carry out new five forces to identify threats and opportunities. /
So from the above discussion it can be understood that the firm should align itself
with the environment to achieve strategic fit which helps in achieving the competitive
advantage. Hence “a strategy that achieves fit outweighs all other strategies”. As per
Porter (1996) sustainable advantage comes from a system of activities that are
integrated and complementary to each other and these complementarities become very
difficult to copy or duplicate as the competitor has to match not only one activity but
the entire system yes. This is in resonance with Barney (1991) who stated competitive
advantage persists when the competitors are unable to neutralise or duplicate it so.
What I am getting in this paragraph is a number of ideas which have the ‘feel’ of
relevance to each other and the question but I find I am having to make the
connections because you are not. This makes me think you do not understand these
points sufficiently well to make their relationship to each other coherent. In other
words, they need to be more thoroughly explained.

So one of the approaches for sustaining competitive advantage that emphasize on how
best to achieve consonance with the five forces is Porter’s positioning approach.
According to Porter, firms can gain competitive advantage if they follow generic
business strategies like Low cost, Differentiation or Focus. Low cost strategy mainly
focuses on efficiency which helps to invent new process which tends to lower the unit
prices. Differentiation strategy helps firm to concentrate on customer responsiveness
which drives innovation of new products rather than new processes and keeping high
prices for the product. Focus strategy is defined by the scope, whether the firm is
concentrating on wide range of customers or narrow range of target customers. A
company which pursue more than one of the above strategies is said to be stuck in the
middle and the firm earns lower than average profits. Therefore firms which makes
consistent trade offs and pursue one strategy can achieve sustainable competitive
advantage. /

The above discussion mainly focussed on analysing external environment and


achieving fit to attain sustainable competitive advantage. However as per Barney
companies like Dell, southwest airlines and Wal- mart are able to be more profitable
in their industry thought it is not attractive. yes This shows that environment is not the
only the determinant of firm’s profit potential yes and this can be explained by
Research Based View (RBV) no. According to RBV firms sustain competitive
advantage due to their resources and capabilities yes. Deriving competitive advantage
frorm resources depends on its characteristics and the organisational ability to
leverage it yes. Firms that develop distinct capabilities maintain their resources and
hence provide distinct competencies to the firm which aid in sustaining competitive
advantage . Therefore the long term strategy for any firm is to apply and develop
resources because these provide stable basis for formulation of strategy in ever
changing market. Is it, what does Porter 1996 think - I mention it because you did 2
paragraphs previously.

Another perspective of sustaining competitive advantage is through value innovation


proposed by Kim and Mauborgne which create profits by delivering superior
customer value at profitable cost. In contrast to 5 forces approach which emphasise on
strategy responding to the environment, according to this approach strategy creates
the environment for the firms to be profitable by looking outside the industry
boundaries, strategic groups and redefining buyers and identify a blue oceans instead
to compete in red oceans. Are you saying only red oceans have 5-forces and blue
oceans do not?

To conclude, to sustain competitive advantage analysing the industry environment is


needed and firms may respond by formulating the strategy based on the environment.
However, if there are intense competing firms that make industry not attractive firms
may sustain competitive advantage by RBV and value innovation approach as
discussed above. Therefore porter five forces may be relevant in helping firms sustain
competitive advantage if industry is attractive and can be used as a staring point in
other situations, but more likely not to be taken as only way to achieve sustainable
competitive advantage.
You needed to be more explicit over the relationship between the 5 forces and the
positioning view of competitive advantage. You note it, but fail to make it central and
it gets a bit lost in a rather rambling assemblage of issues and ideas. Same with your
RBV and Blue Ocean critiques. It is like you have found the right bits of the jigsaw
but you haven’t put them together to form the picture. I do not have a clear answer to
the question, but I have the bits which could be. You needed to be clear as to how
Porters generic strategies each achieve fit with the 5-forces. Clearly a pass, but short
of a merit. It needed a bit of time spent planning the structure of the answer.

Anda mungkin juga menyukai