Porters Six Forces Model


Global Strategy Section A

Porters Six Forces Model

Porter’s six forces model is divided into six different forces such as threats of new entrants, the threat of substitute, degree of rivalry, bargaining power of buyer, bargaining power of supplier, the relative power of other stakeholders. Each and every force of porter’s six force model will be discussed below.

Force 1

Threats of New Entrants

The threat of new entrants in the same business is the force which explains the reliability of new entrants of entering obstacles. These obstacles are the great threat to any business if they are possible and flexible because this must expand the number of dynamic competitors in the business and on the opposing they may react in a different manner to the dynamic entrants for duplicating the position of incumbents (Steele, 2010). These obstacles can be within the channel of distribution entry cost, economics scale, legislation of government and service or product differentiation of business. The force as new entrants includes some strength and weakness as like, the organization can make various kinds of product and provide the service from the strategies of new entrants. As a result of that, the organization can develop its business in the market. Due to new entrants, the organization may face a lot of problems as like the number of customers will be decreased, and the employee may leave the organization and join in any the new entrants. As a result of that, the revenue of the business will gradually decrease as well as the performance of the workplace will be down. Besides that, finally, the organization can lose its entity in the business workplace.

Force 2

Threat of substitute

The substitute service or products are important to the threats for the basic necessity of consumer’s gratification. This threat is mainly related to the price factor of services or products because customers switched to change alternative when the same seek of gratification is got at the lower price (O’Shaughnessy, 2010). The competition of substitute relies on the comfort of the customers to change on the substitute products or services. Generic substitution, substitution of product for the product are involved in the shift of customer to substitute. Besides that, there are some weakness and strength in the threat of substitute. If the customers don’t get their selected and desired product, then they can hesitate and are not willing to buy this(Bellamy and Child, 2010). On the other hand, sometimes customers purchase the substitute product in place of their selected one then sometimes they get benefit from this due to the better quality of the product.

Force 3

Degree of rivalry

This force of porter’s six force model is very important in an organization. The existing organization of same business is led by the head to head competition to enthrall greater market share due to its better and separate value. The essential capability of the organization is framed by this force in the business, and this force is the most urgent force which tracks any other forces to describe the business attraction. In other words, it will be most probably seen having great in the business where there is a better threat of substitute products and purchasers’ existing power and the strength of suppliers. Besides that, there are some weakness and strength in the degree of rivalry. As new entrants the organization will face a lot of problems as like the organization will not get maximum customers in their business for new entrants. For that, the organization has to make a suitable atmosphere for the business. So they need to make new strategies and implementation accordingly(Masterman, 2002). The new strategies will help them to accomplish the competitive rivalry.

Force 4

Bargaining power of buyer

The bargaining power of customers is mainly depended on the behavioral approach, concentration and size of the customers. The intensity of variation to the competitors is influenced by the degree to the customers are generated. On the other hand, to use the power of potential customers, the organizations must distinguish willingness which derived from the range of risk association of service or product used by the customers. In the case of low-cost switching between suppliers, this force is appeared in high level. Apart from that, the customers are price sensitive, so the management of the organization needs to pay more attention at the price of products or service. Along with this side, the strength of this forces is that proper estimation of customer’s need, the expandable amount of customers who will be recognized by the organization. In addition, with the help of this force, the organization able to provide desired product or service at an affordable price to their customers. In terms of weakness of this forces mainly includes the behavior of customers. In simple words, the worst behavior of the customers will affect the purchase behavior of the customers and the customer will not be satisfied at all(March and Simon, 2003).

Force 5

Bargaining power of suppliers

The power of supplier’s bargaining can be assumed as a mirror image of the customer power. In other sense, the organization must focus on the difference of size and concentration of the suppliers in capacity with participations of the rival industry. In the case of high distinct prices of products can influence the difference in the chain of value and after that, it claims to include a greater supplier power(Tebogo, 2009). On the other hand, where the cost of switching suppliers is very high, the bargaining power of the suppliers will automatically high. According to many significant studies, the bargaining power of the suppliers depends on of the preference of the leaders of the organization. Besides that, if an organization produces impressive and effective products which satisfy the customers through its service then the bargaining power of suppliers will be high. Apart from that, the strengths and weakness of this force include some significant aspects such as demand of the suppliers will be recognized by the organization as a strength factor. Besides that, high demand of suppliers due to the market condition can be determined as a weakness of this force. Moreover, the bargaining power of suppliers can be measured as essential forces which influence the productivity of the organization(Trainer, 2011).

Force 6

Relative Power of stakeholder

The porter’s six force includes the impact of all stakeholders on the organizational performance. In other sense, employees, customers, government, and shareholders are the main stakeholders of the organization. Recent studies conclude that these stakeholder’s power can be determined as considerable factors which influence the performance of the organization. On the other hand, with the help of the collaboration of the stakeholders, an organization can increase the performance, as well as the productivity will be enhanced. Besides that, the stakeholder also is a part of success which mainly supported by the management of the organization. In terms of strengths and weakness of this six force mainly elaborated lots of experts in many studies. In addition, the point of view or opinion of the stakeholders can help the management to take appropriate decision for the organization(Lusthaus, 2012). As a result, the operational activities of the organization can bring more effective productivity. On the other hand, many stakeholders provide wrong information related to products or service. So, the management has to face trouble to recognize inner problems for effective decision-making process.

Section B

5. Evaluating the role of merger and acquisition in corporate strategy

In the corporate world, merger and acquisition are usually referred to as M&S. It is an important part of the enterprise business. When two organizations merge with separate entities, the joint venture is known as M&A. Moreover, merger and acquisition are important for strategic management. Monitoring. The most corporate clarification behind the relationship to go into mergers and acquisition is merging their control and oversight over the market(Reed and Lajoux, 2016). Moreover, Synergy is another favored angle. Additionally, it is known as the magic power. Magic power mulls over extended efficiencies of estimations of the new entity of the company. Besides, the best right position is tax reductions. Economies of scale are surrounded by sharing the organizations and resources. On the other hand, economic crucial points may instigate mergers and acquisition. Merging is a strategy of joining two businesses. On the other hand, acquisition refers to a situation where one company acquires another, and the latter cease to exist. It takes the grant of the benefits improvement along to cost venture stores. One of the competitive advantages is the diminishing of value. A decrease of threat is similarly preference of mergers and acquiring. It increases cash related impact and to utilize the choice tax reductions. Mergers and Acquisition give the relationship to make full use of imaginative progressions to build competitive advantage(McManus and Hergert, 2015).

When two companies merge, both of them spread threats to other businesses. As a result, competitive advantage is gained. Merger and acquisition are usually not central to accomplish strategic objectives. A successful merger plan will bear fruitful results. A detailed merger plan over how the implementation of the merger should be executed and implemented is very significant.

The importance of merger and acquisition in business

When a company is unable to grow its business in spite of using many strategies, then the company take help of another company to grow its business in future. That time, both the companies make decisions together. It is important for both the companies to avoid conflicts between them. The merger and acquisition in corporate strategy enable successful businesses to grow faster than their competition. The growing process is done by the combining the strengths of both the companies. Both the organizations needs to identify the strength and weakness of each other(Jensen, 2013). After determining the strength and weakness, both the enterprise should work with only positive points. M&A also helps to reduce the cost that is achieved by combining the operations, departments as well as trimming the workforce. It helps in increasing the revenue by the absorption of a major competitor. Consequently, the market shares are also maximized. The particular strategy helps new companies to enter the international market. Along with the companies, new products also gets a chance to reveal their quality in front of public. Some of the merger and acquisition take place for market supremacy. As a result, they can reach economies of scale.

Role of Human Resource Leaders in merger and acquisition

During merger and acquisition of two companies, the human resource leaders play a major role. During that time, the professionals of human resource involve themselves at very early stage. Merger and acquisition have several reasons to be reasonable. The companies undertake the special deals can either gain from them or can be a complete failure. Moreover, it is significant to support any strategic plans of the organization with their merger and acquisition program(Brueller, Carmeli and Markman, 2016). Besides, they engaged themselves in quantifying the economic and financial aspects of the people’s issues. Benefits and pension cost are the issues of the people. When two companies merge, the pressure falls on the leaders of human resource. The leaders of human resource take the responsibility to recruit new employees who will work in the joint venture. The leaders also take responsibilities to retain old talented employees in the company.

Merger and acquisition in corporate strategy

Mergers and acquisitions mainly support a corporate business which takes effects changes into their corporate assembly by joining any other corporate company anyhow. By the combination of expertise in corporate strategies and business management, the experts deliver their expert advice which can help the corporation restructure and this effects in the merger acquisition. The merger and acquisition are used together often, but these two words are very different from each other (Merger and acquisition roundup, 2011). The merger attaches two separate corporate companies together for became one single company where acquisition helps one corporate business in buying out or take over any other corporate company. That company which has been acquired or been taken over by the other company will be called as dissolved company. Corporate companies have various strategic reasons to being merged with another company or take over any other corporate company successfully. This reason helps the corporate companies in achieving their goals and also helps in increase their cost efficiency also (Cho, Lee and Kim, 2014).

The process of being merged with another company or take over another company is very complex. Many legal considerations should be aware of from the enterprise side which is merging or acquiring any other company. After that, many tax implications and terms and conditions from the company and most importantly deal benefits from both parties must be aware of before the process of merger and acquisition starts. Corporate companies sometimes depend on top lawyers and merger & acquisition experts for negotiating the deals. The merger & acquisition experts also forecast highlights towards the possible effects of changes in the company structure after being merged or acquisition. This forecasting can be very helpful for the company’s management teams in making of decision which option will be the good choice for them.

Therefore, many companies’ deliberate mergers and acquisition process as their opportunities for growth that they can deliver worthwhile business solutions for those businesses that were attempting to downscale their business or looking for an efficient exit scheme. Corporate companies can reduce their costs and reorganize their operations towards profitability by depriving their company assets. If any company have their subdivisions or departments which are underperforming, they can have faith in merger and acquisitions experts and their forecasts which help them dispose of their assets according to their overall business goals and objectives. The corporate finance experts can help in the maximization of the corporate company sales by helping the corporate companies in preparation for the potential process of merger and acquisitions. Negotiation for the deals between the companies can be a long term process sometimes (Maharaj and Reddy, 2013).

So, sometimes corporate companies also rely on the merger and acquisition experts through the negotiations process, ensuring that the experts will meet the requirements as well as the experts will also achieve the best suitable deal for the company. Besides that, the merger and acquisitions can be a quick and efficient way for the corporate companies in achieving their objectives and multiplication of company growth. The company also rely on the experts before closing the deals. The corporate companies will ensure that they were going through their business strategy by consulting with their merger and acquisition experts.

Role of merger and acquisition in ethical business

Mergers are the complex process, the interests of the participant’s interests are sometimes often in conflicting and competing. The fundamental ethical conflicts regularly distress the particular benefit of the stockholders. The stockholders cannot be only protected by the third parties who always want to acquire the company through discriminating tactics.  This thing creates financial and also sometimes emotional stress between stockholders relationships and corporate board and management officers. In earlier, “the Business judgment rule” which has administrated the ethical code of the acquisition process and after that the courts have given the order to the management to critic the entire fairness of the takeover process. The only stockholder’s interests are only relevant issue, the management accountants need to assess the effects of the complete process (Chibuzor, 2016)


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