Question

400 words

Assume you are strategy expert of a company in your country.

Required:

1. Discuss how each of the Porter’s forces would affect/influence decision or strategy of your company.

2. Suggest how the company can create and sustain its competitive advantage.

Answer 1

1

Answer:- Porter’s five forces is an analysis tool that determines the company strengths and weakness using five competitive forces.

Five of Porter’s forces that would affect the decision in the company are:-

1) Industry competition:- If there is a high degree of competition then it will reduce the power and push the company to lower the price and innovate new products. And if there is low competition then the company can either play as a monopoly in the market or can be short-lived.

2) The threat of new entry:- When there are new entries in the market then it will reduce the profit of the company because there will be more competition and thus reduce the power of the company.

3) Supplier power:- When there are more suppliers in the market then it becomes much easier for a company to switch to a cheaper alternative but if there are fewer suppliers then they have more power and this directly affects buying companies' profit because they have to pay for more the materials.

4) Buyer Power:- If the customer has strong bargaining power then they can put the firm under pressure by demanding lower prices for high-quality products and affect the prices in the industry.

5) The threat of substitute:- When there is a close substitute product in the market then it gives a chance to buyers or customers to easily switch to alternative products that provide better price and quality and thus affect the business profits.

2)

Answer:-Company can create and sustain its competitive advantages in the following ways:-

1) Cost Leadership:- This strategy is used when a company is able to produce the same quality products or services at a lower price than competitors. Thus, due to its significant cost advantage over its competitors the company is able to earn a good profit.

2) Differentiation:- A company used this strategy to differentiate its product and services by providing superior value and innovative products than its competitors. The customers are even ready to pay a high price if they find the product or service unique than others.

3) Focus:- This strategy used to understand the target audience and provide customized products and services. In this way, the company will be able to become a cost leader and differentiate products and services in the market.

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