Q1-Identify the competitive forces in Porter’s model. What affect might these forces have on a business? What can a business do to respond to these forces?
There are five sources of competitive force in Porter’s model. The five forces will be rivalry, supplier’s power, threat of substitutes, buyer power and barriers to entry. Rivalry refers to competition from rival firms which will affect the ability of an organization in retaining and attracting customers. In addition, many companies offering similar products will push down prices and this will affect the profits of the organization. Next, supplier’s power refers to the influence which the suppliers can influence on the industry since they are the ones who controls the availability of inputs. Suppliers can become powerful threats when they join together to push up prices which will increase cost of inputs and increase cost of production for business organizations. In addition, they can also pick and choose who to supply and can favor the opponents of a company which will further increase rivalry faced by the organization. The next competitive force will be the threat of substitutes. The presence of substitute goods will cause customers to swing to other companies should they find factors such as prices and distribution more favorable and this will result in a dip in sales. Another force will be buyer power which refers to the bargaining power of buyers and changes in taste and behaviors which can easily threaten and affect level of sales of business. Lastly, low barriers to entry can result in entrants into the industry which will increase competition and threaten the market power of a company. To respond to these forces, company can promote customer loyalty through product differentiation, advertising and branding and also engage in diversification of products to reduce risks. Individual Assignment: