Five Competitive Forces: Shaping Strategy

Shaping strategy? Does it really mattered? I mean I am an instructor, do i really need to review what is the strategy of my own organization?

These are the questions I left unanswered when the lecturer was discussing this topic. Since, I am a faculty member of Brokenshire College, I never really thought of any strategic plans for the school. i am just focused with my job responsibility which is to teach. But, as the discussion became serious and deeper, I quite realized that I should make a move to participate (at least on my own) for the betterment of the organization where I belong.

With the help of Porter's five forces analysis, I can now understand how a certain organization undergo strategic planning.

Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit.

GENERIC STRATEGIES TO COUNTER THE FIVE FORCES

Strategy can be formulated on three levels:

corporate level
business unit level
functional or departmental level.



The business unit level is the primary context of industry rivalry. Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that can be implemented at the business unit level to create a competitive advantage. The proper generic strategy will position the firm to leverage its strengths and defend against the adverse effects of the five forces.