Six Industry Forces - Essay Example

Identify the six industry forces and explain how each of the forces can affect the level of competitive intensity within an industry. Answer: Thesix industry forces are the following: a. Rivalry among existing firms. b. Threat of new entrants c. Threats of substitutes product/services d. Bargaining power of buyers e. Bargaining power of sellers f. Relative power of other stakeholders Rivalry among existing firms bring forward the opportunity to each firm to be a cut above the other. The result of this is to come up with competitive advantage (Porter, 1980). This is the real case in which firms try to differentiate their product or service offerings just to be able to gain considerable market share in the midst of an ongoing competition. The threat of new entrants on the other hand is alarming to the existing firms of the same industry. This is because the new entrants try to remarkably prove themselves and share something new that will create a significant impact in the market (Porter, 1980). Threats of substitute products or services bring forward the opportunity for customers to have various choices. As a result, customers have strong market power because of their chance to choose for the best price, quality and other intrinsic features of a product or service offering (Porter, 1980). Bargaining power of buyers may happen if there are various product or service offerings to choose from. This happens in a highly diversified market where there are existing competition trying to diversify their product or service offerings resulting to better substitutes at remarkably lower prices or even higher quality, the bottom line is to extend market power (George, Joll, & Lynk, 1992). Bargaining power of sellers on the other hand can affect the level of competitive intensity within an industry by taking advantage of maximizing their opportunities. They could either monopolize the industry under a monopolistic competition (McEachern, 2011). This is evident in the case of Philippine Petroleum Industry and other third world countries which are under the bargaining power of multinational corporations on petroleum products. Relative power of other stakeholders is also influential on the competitive level of an industry. One basic example is the ability of Apple Incorporated to successfully penetrate the mobile phone industry with its innovative smart phone technology (Apple Incorporated, 2011). This happened because Apple is supported by various stakeholders for the successful promotion of its breakthrough technology. As noticed, the market today is bombarded with different styles and options for smart phone technology. 2. What information is needed for effective strategy formulation? Why? Answer: An organization must be able to measure the level of commitment of its top personnel such as the managers or supervisors in order to be able to understand how well they would want to continue its vision (Ferrell, Fraedrich & Ferrell, 2010; Zanini, 2007; Hitchcock & Willard, 2009). In fact, it is found that a strong commitment among top managers in an organization is associated with effective strategy implementation outside the bound of environmental dynamism (Willauer, 2005). This only implies that an effective strategy formulation does not only ensure finding the right information about the competitors’ strategic moves or the external environment in general, but more so, there is a need to understand the internal environment because it definitely affects how the entire organization would function in great detail in the midst of its entire business operation. For instance, we know how the economic downturn in 2008 affected the United States and the business firms. However, such external factor sometimes may be overlooked but one thing that could not be missed out is the information about employee commitment. In times of crisis like this, employees would most likely to consider many issues and on top of them it might be about their concern on sustainability. How they could feed their family, or ensure making both ends meet might be among of their basic considerations. However, the commitment of an employee to stand with the team and continue to be part in the strategic formulation in the midst of the adversity within an organization is a remarkable act. 3. What is the relationship between corporate governance and social responsibility? Answer: In order to know the relationship between corporate governance and social responsibility, there is a need to understand how corporate governance functions and work in detail in an organization. Corporate governance is said to be a critical factor for corporate social responsibility mainstreaming (Idowu & Filho, 2009). It is in line with this that good corporate governance will eventually build a great impact on corporate social responsibility. For instance, a good corporate governance structure will definitely consider good structure for its corporate social responsibility as well. This can be elaborated further by understanding corporate governance as an internal structure of an organization while corporate social responsibility as the output of the former. As an output of corporate governance, corporate social responsibility is essentially employed in an organization’s external environment. At some point, excellent corporate social responsibility paves way to various opportunities for the company or firm (Werther & Chandler, 2010). One specific example is the corporate social responsibility application implemented by McDonald’s for many years. This eventually led to the promotion of the said firm and its service and product offerings. This implies that with excellent corporate social responsibility, a certain firm has remarkably considered excellent corporate governance. Such move ensures excellent achievement in various areas or aspects such as finance, marketing and business operation of the firm. This is evident in the case of McDonald’s that for many years, its excellent corporate governance led to application of highly sophisticated corporate social responsibility program for its stakeholders. As an international firm in the food chain retailing industry, McDonald’s always ensures compatibility of its business structure with its responsibility for its customers. One specific example is its ability to cater healthy foods as its innovation for various health conscious customers (McDonald’s, 2011). 4. Why is environmental uncertainty an important concept in strategic management? Discuss Answer: Environmental uncertainty is an important concept in strategic management because it definitely affects the whole implementation process of the strategy and the organization’s structure and internal behaviors (Daft, 2009; Porter, 1980; Kirschkamp, 2007). Uncertainties are sometimes out of an organization’s control. Sometimes, organizations are not able to prepare for them and they are not ready to face them as well. Some organizations are forced to face them only to find out that they do not have the essential strength to actually beat them. As a result, environmental uncertainty has a great chance to cause an organization to fail. This is evident in the US economic downturn. In the midst of the US economic crunch, many investors were so dependent on the US economy and only to find out they lost their chance in an instant. Perhaps one of the most common environmental uncertainties is regarding with economic concerns. Surviving financial meltdown is not that easy. This requires careful planning and proper implementation of different courses of actions. This is a specific case proving that environmental uncertainty is an important concept in strategic management. Just as stated in the above example, economic uncertainty needs to be faced with substantial amount of preparation. Another concrete example is the consideration of political uncertainty. From time to time, a nation changes policies and procedures on how to conduct businesses for both local and international firms in a specific industry. Investors or stakeholders need to be carefully prepared in situations like this. This could become challenging and tough times for them to adjust and could mean loss of their business at some extent. 5. In what ways may a corporation’s structure and culture be internal strengths or weaknesses? Answer: The corporation’s structure and culture may be internal strengths if they are employed in a country where there is a strong advocacy to prevailing national culture which happened to be strictly mandated to be employed within various firms. Secondly, a sufficient support by the government for each organization’s structure could remarkably prove another remarkable strength. In Japan, small medium enterprises are highly protected by the government to the extent that these firms are regarded as integral parts of the decision-making process especially if it concerns their sustainability in the long run. According to Hofstede’s theory of culture, Japan unlike the United States regarded team work at the highest level (Hillebrand, 2008). Unlike in the United States, people in Japan are not after of individual competition but teamwork. It is in line with this that they help each other in order to obtain sustainability for all. Thirdly, corporation’s structure and culture may be internal strengths if the firm’s human resource is integrating them with their core values (Condrey, 2010; Bandt & Haines, 2004). As a result to this, employees will be guided on their daily tasks and functions with the values and principles that the company wants to promote based on its corporate structure and culture. This should be essentially applied especially in the case of international companies employing diversified human resource with different cultural backgrounds or orientations. As a result to this, the company should create core values integrating its situations in its corporate structure and culture. References Apple Incorporated. (2011). iPhone. Retrieved September 26, 2011, http://www.apple.com/iphone. Bandt, A., & Haines, S. G. (2004). Successful Strategic Human Resource Planning. California: Systems Thinking Press. Condrey, S. E. (2010). Handbook of Human Resource Management in Government (3rd ed.). California: John Wiley and Sons. Daft, R. L. (2009). Organization Theory and Design (10th ed.). Ohio: Cengage Learning. Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2010). Business Ethics: Ethical Decision Making and Cases (8th ed.). Ohio: Cengage Learning. George, K. D., Joll, C., & Lynk, E. L. (1992). Industrial organization: competition, growth and structural change (4th ed.). New York: Routledge. Hillebrand, J. (2008). Cross-cultural Competence: Analysis of a Sino-Western Negotiation Setting. Norderstedt: GRIN Verlag. Hitchcock, D. E., & Willard, M. L. (2009). The business guide to sustainability: practical strategies and tools for organizations (2nd ed.). Virginia: Earthscan. Idowu, S. O., & Filho, W. L. (2009). Professionals’ Perspectives of Corporate Social Responsibility. London: Springer. Kirschkamp, A. (2007). A contingency-based view of chief executive officers’ early warning behavior: an empirical analysis of German medium-sized companies. Wiesbaden: DUV. McDonald’s. (2011). Food. Retrieved September 26, 2011. http://www.macdonalds.com/us/en/food.html. McEachern, W. A. (2011). Economics: A Contemporary Introduction (9th ed.). Ohio: Cengage Learning. Porter, M. E. (1980). Competitive Strategy. New York: Free Press. Zanini, M. T. (2007). Trust within Organizations of the New Economy: A Cross-Industrial Study. Wiesbaden: DUV. Werther, W. B., & Chandler, D. (2010). Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2nd ed.). London: SAGE. Willauer, B. (2005). Consensus as key success factor in strategy making. Wiesbaden: DUV. Read More