Five Forces and Value Chain Analysis - Coursework Example

Name: Instructor’s name: Course: Date: Five Forces and Value Chain analysis Introduction A business’ strategic positioning may be used as way to increase the revenue it generates. A business operating on a strategy is enabled by the strategy to achieve an advantage in the market over the competitors. Harvard professor, Michael Porter formulated the strategies that can be implemented by business firm’s managers in any industry under any situation to achieve the competitive advantage in the market. Porter’s five forces analysis is a structure that is used in competition analysis in a business plan improvement or within an industry. It revolves around organization of industrial economics to develop five forces to facilitate establishment of the intensity of competition and consequently market attractiveness. This attractiveness will be defined by the profit level of overall industry (Dobbs 2014). A graphical representation of Porter's five forces A value chain refers to the chain of activities performed by a specific firm in an industry so as to deliver a product which is valuable or rather a valuable service for market. This whole concept is to create a competitive advantage and sustain a performance that is superior to the competitors in the market (Yan and Wang 2014). The following is a comparison between a retailer company ABC and a service providing company XYZ using Porter’s Five Forces and Value Chain analysis. Business definition The ABC Company struggle to offer the best quality and most miscellaneous selection of household goods by offering combination discount offers and value packs so as to be able to present these products at lower costs than the competitors, keeping essential goods at unbeatable prices. Some of the goods provided for sell in the market include the household goods such as the utensils and the cutleries among others, the clothing and bicycles. The ABC Company’s management team believes in the Porter’s generic management strategy to gain competitive advantage in the marketplace. The main focus of the firm is to offer goods at the most affordable prices by the targeted customers. In connection to the four generic strategies, the ABC employs Low-Cost Focus Strategy which is normally known as "niche marketing." The firm does this by, picking a precise segment of market and subsequently directs its product selling straightforwardly to it. Low-cost account of focus approach entails targeting a market niche and offers the product at cheapest prices to fit specific needs of that market's. By doing this the firm increases its market share and the product selling frequency also rises. The company also uses Strategy of Cost Leadership to expand a market share by offering low prices at the same time retaining their margins. This is done by producing the products in a cost-efficient method (Dobbs 2014). XYZ Company offers the banking services to its clients. In the process of their serving, the firm’s management employs Differentiation Focus Strategy to get the market dominance over the competitors. This account of the focus tactic entails picking a precise segment of market and instead of offering services at a cheaper price, the business offers a differentiated services. Customization is the center of attention of this plan. Customers have services modified to meet their precise desires. Instead of submitting the cheapest service, the firm differentiates its services using other ways. These include quality service, fashionableness among others. Therefore while the ABC Company focuses on dominating the industry by use of Low-Cost Focus Strategy the XYZ employs Differentiation Focus Strategy but both strategies have proved to be effective in market share expansion and industry dominance. The strategies are among the Porter’s four generic strategies whose remaining two are Cost Leadership Strategy and Differentiation Strategy (Porter 2007) Organizational Divisions The main divisions of ABC Company are finance division (deals with getting funds to carry out operations and allocation of the same to other departments), purchasing division (deals with acquisition of raw materials and other products to be used in the production process and manufacture of finished goods), human resource department (deals with the acquisition of work force provided by human beings to carry out business operations) and sales and marketing department (deals with the sale of the goods produced by the firm and the advertisement or promotion activities involved) (Trond 2009). The XYZ Company also has various divisions but the major ones include the following; Human Resource department (deals with the acquisition of work force provided by human beings to carry out business operations), accounting and finance division (deal with handling of the monetary forms of investments and savings received from the clients and also allocation of funds to various other departments), customer care division (handling of the clients and answering of their requests is done in this division) and IT division (this department deals with the installation of the computer systems and machines that carry out the necessary operations of the company) (Sumpio 2013). MIS Advantages The Management Information System (MIS) is a system used by the Companies or businesses related to XYZ Company to obtain information from the existing data about the employees and clients to give information required to run the firm effectively. Transaction Processing System (TPS) bond with MIS system. MIS summarizes and reports the businesses’ fundamental functions and this information is derived from the transition processing systems the of Payroll, ATM Machine and Customer identification etc. These actions are subsequently summarized in the reports form for the manager to verify whether the firm is properly working or not. If flaws are present, control measures are taken to fix them. MIS is used in giving loans to customers and buying new assets like vehicles for the firms. The firms relating to ABC firm have similarly used the MIS systems in managing their processes of production (Ahenkora 2012). The MIS systems make the data handling and processing efficient and fast. This enables the firm to handle many clients within a small period of time and also provide goods in little time span. The systems are also accurate and very fast in error correcting. The two properties make the firms operate at fewer costs of management and less losses from the errors. This boosts their competitive advantage over other firms without the systems. The MIS enhances the quality products too and makes it easier for the firms to modify their services to meet client specifications too. This attracts more customers who prefer to the new services and better quality products in the market. In the long run these firms get the highest market shares in the industry and click the highest sales levels in the markets (Sumpio 2013). Recommendations The plan of the value chain which is based on the course view of business as a system which is built up with subsystems each containing inputs, processes of transformation and outputs is recommended if the firms want to get a higher boost in the competitive advantage. Outputs, transformation processes, and inputs engage the acquirement and utilization of resources such as labor, buildings, money, materials, equipment, land, and management. How the value chain actions are performed decides costs and profits are affected by it. Products go through activities that are in a chain in order whereby in each activity the product adds a quantity of value. At the end of the chain is the total value added at each stage. Activities that add more value at a little cost are preferred in this process. The competitive advantage and the subsequent support of the advantage with the information technologies can be achieved with careful execution of the process of value system (Trond 2009). It is also recommended for the firms to consider the five forces carefully and use the Porter’s system of reason to make managerial decisions. The forces to be considered include the following; Threat of new entrants (advantageous markets that give in high profits will exert a pull on fresh firms. This will consequently lead to a lot of new entrants, which finally will diminish success for all industry firms), Threat of alternate services or products, Customers’ bargaining power (businesses can take actions to decrease power of the buyer, like employing a program of loyalty. If high, the buyer has many alternatives), Suppliers’ bargaining power (firms can do the same as for the customers but in an opposite direction) and Competitive rivalry intensity (Ahenkora 2012). Conclusion Porter’s five forces analysis is used in competition analysis in a business plan improvement or within an industry. It revolves around organization of industrial economics to develop five forces to facilitate establishment of the intensity of competition and consequently market attractiveness. This attractiveness will be defined by the profit level of overall industry. The plan of the value chain which is based on the course view of business as a system which is built up with subsystems each containing inputs, processes of transformation and outputs can be used too if the firms want to get a higher boost in the competitive advantage. The Management Information System general usage in the firm can also increase the efficiency and competitive advantage of the firm. While the ABC Company focuses on dominating the industry by use of Low-Cost Focus Strategy the XYZ employs Differentiation Focus Strategy but both strategies have proved to be effective in market share expansion and industry dominance. The strategies are among the Porter’s four generic strategies whose remaining two are Cost Leadership Strategy and Differentiation Strategy. References Dobbs, Michael E. "Guidelines For Applying Porter's Five Forces Framework: A Set Of Industry Analysis Templates."Competitiveness Review 24.1 (2014): 32-45. Sumpio, Bauer E. 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