Question

Management Question

1. Identify the five forces that underlie Porter’s five forces model of competition.

2. Analyse the industry structure of the public transport industry in Hong Kong and assess its attractiveness with Porter’s Five Forces model.

3. In the study of strategic management, the ‘resource-based view’ is one of the main approaches taken by scholars.

a. What is the resource-based view (RBV)? Define and explain the terms ‘resource’, ‘capability’ and ‘competitive advantage’.

b According to the resource-based view, there are specific criteria that managers can use to decide which of their firm’s resources/capabilities have the potential to create a sustainable competitive advantage. Briefly explain these criteria and discuss why they are important for sustaining competitive advantage.

4.

a. Describe and explain ‘value chain analysis’.

b. Use the value chain to discuss how to build differentiation advantage in a company

5.
a Why is it so important to analyse and understand the external and internal environments for strategic success?

b What is an industry exit barrier? Explain and illustrate with two real- life examples of different cases how high exit barriers affect the competition within an industry?

Answer 1

Porter’s five force model answers many questions that whether the industry/company is going to be profitable, what are the competitors and rivalry, business and firm’s scenario etc.

It is business analysis model that tells that why some organizations get different levels of profitability. It is very helpful to form the strategies. As the companies find out which force is weak and they make strategies according to the weakness to overcome the weakness. Here are the five forces which are applied on any industry or a company.

• Competition in the industry;
• Potential of new entrants into the industry;
• Bargaining Power of suppliers;
• Bargaining Power of customers;
• Threat of substitute products.

Competition in the industry- This strength shows that how many competitors are there and what are their possible impacts that can harm the company’s profitability. The more the competitors with same products or services lesser will the companies strength and lesser profitability chances.

Potential of new entrants into the industry- In this strength it is calculates that what is the capital needed political laws, government rules and regulations to form a new company. The more capital needed and more strict rules and regulations it will be easier for the existing companies to conduct their business with profitability.

Bargaining Power of suppliers- For companies there are many suppliers who provide raw materials or any type of support. It is analyzed that what is there bargaining power. If there is large number of suppliers’ available then the companies can bargain with many suppliers and they will have the opportunity to select the cheap suppliers.

Bargaining power of the customers- It is analyzed that what is the bargaining power of the customers. It means that if the customers have alternatives available then the company will not have the bargaining power and the cuso0tmers will have. The power of the customers will get the price down of the company’s product.

Threat of Substitute- It might possible that any substitute can take place. For an example CDs were substituted by the DVDs. Now suppose CD manufacturer who have not analyzed the Five Forces model and did not change their strategies accordingly then they will be nowhere. The competitors can provide a substitute product at very cheaper cost.