Five Competitive Forces Essay

Five Competitive Forces The Five Competitive Forces that Shape Strategy and Dynamic Capabilities focus their attention to the different approaches for business success. For one, the object of the article is for firms to be successful and or fail and how the knowledge of these approaches can assist an organization achieve a more profitable position where they are less susceptible to attack. Dynamic management discusses three existing models that describe aspects of an emerging paradigm that we label dynamic capabilities.

First: The Competitive forces approach by, Porter (1980. ) Whose competition strategy formulation emphasizes the action a firm can take to create defensible positions against competitive forces. Second: Strategic conflict in a publication by Carl Shapiro 1989. The main trust of this strategy is to reveal how a firm can influence the behavior and action of rival firms, and later overpowering the environment. Lastly: Resource based perspective, firms succeed because they have markedly lower costs or offer markedly higher quality or product performance.

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This approach focuses on the rents accruing to the owners. The Dynamic Capabilities approach is a battle between high technology industries. Companies such as IBM, Texas Instruments, and Phillips have followed a resource based strategy of accumulating technological assets. Furthermore, The Five Competitive Forces that Shape Strategy by Michael Porter, looks at the power of five distinct competitive forces, which can determine long-term profitability and competition. Rivalry among existing competition is fierce in the industry but often not seen and not limiting. • Threat of New Entrants puts pressure on existing prices, costs, and the rate of investments necessary to compete. •Bargaining Power of Suppliers captures most of the value for themselves by charging higher prices and quality of products low. • Threat of Substitute Products or Services could be the downstream of indirect substitutions which perform the same as an industry product. Bargaining Power of Buyers is where customers have negotiating leverage, are price sensitive and can pressure for price reductions. In conclusion, in this world of competitiveness firms must, according to the content of this article, strive to think structurally about competition. These five competitive forces mentioned reveal whether a company or firm is truly attractive. They distinguish “short term blips” from structural changes so investors can take advantage of undue pessimism or optimism in their favor.


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