Porter’s Five Forces Analysis: Strength Of A Company

Porter’s Five Forces Analysis Name Institution Porter’s Five Forces Analysis Introduction The Porter’s Five Forces model is a very usefulstrategy for determining where the strength of a company is vested.The model is vital since it assists a company in identifying the strengths and the weaknesses of the company, including the competitive factors and new business opportunities. Understanding the strengths and weaknesses within a company gives an advantage of knowing what the major advantages and disadvantages are for your company. It also helps you avoid making bad decisions that could affect the company’s performance by understanding what the consequences of your decisions might be. I researched about Cochlear Company and investigated the applications and implications of the model of the company. The model is a very important tool that can be used in the planning and creation of a strategy for a new company to enter the market or for a company to introduce/rebrand a product in the market. The Model, as its name indicates, is mainly constituted by five elements that help the companies have a better understanding of the industries and the risks that they are getting into. The elements include intensity of rivalry among competitors, the threat of potential entry, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitutes. Figure 1: Porter's Five Forces The Intensity of Rivalry among Competitors Knowing the intensity of rivalry among competitors helps companies understand the number and capability of their competitors. In an equal situation where there are many competitors with similar products and services, it is most likely that companies will possess minimum strengths in this case since sellers and buyers have the power to choose between products to the one that offers the best deal. As intensity increases, companies found themselves in complicated situations where they have to constantly change prices, create intense advertising campaigns and take high-cost competitive actions in order to differentiate from the other companies. Due to high profitability, the competitive rivalry of between industries is high. There are many factors that companies can compete on, such as product reliability, technology, quality, and most importantly, price. Cochlear faces not only local competitors, but also more on the intense rivalry between international companies in China and India (Einhorn & Khan, 2013). The companies compete on price wars in order to be a cost-leader in the market. The Bargaining Power of Suppliers The supplier power helps companies assess the possibility of sellers to increase the prices of the commodities they are selling. The act depends on the population of the willing sellers in the market, including the depth of differentiation of the products offered. The fewer the suppliers, the more powerful the suppliers are. The buyer power is very similar to the supplier’s power except that the suppliers enhance their power by entering the market with forward integration, while the buyers enter the market with backward integration. Due to the majority of research and chemicals, there is a little distinction between suppliers, which causes customers to have greater choices to acquire the best quality and price in the market, thus suppliers’ power is reduced (MarketLine, 2013). However, custom-made devices force a company to rely solely on certain supplier, which contrarily increases suppliers’ power. Researchers in the biotechnology industry acts as well as suppliers, where through their knowledge, create useful products for the society. It is important to collaborate well with the researcher in order to prevent them working for the competitors. Overall, the suppliers’ power is assessed as moderate. The Bargaining Power of Buyers The buyer power helps companies understand the po...