Critical using Porter’s model is that it assists

Critical Reflection on Term 1 Strategy Analysis Tools Porter’s Five Forces ModelThe Porter’s five forces model, created by Michael E.Porter in 1979 was designed to measure and evaluate the competitive intensity andpositioning of a business.

 The modeldefines five forces which can have a negative impact on industry. They are asfollows:-Threat ofentry – higher level of barriersto entry an industry result in higher profitability of a business due to fewer competitionin the market.Bargaining power of suppliers – Outlinesthat a limited number of suppliers in the market have greater pricingcontrol then buyers. Bargaining power of buyers – buyers havethe ability to dictate pricing trends or demand higher quality products, whichhave got negative impact on profitability of producers hence increase in productioncosts. Threat of substitutes – consumers changepreferences due to increase in price of some products by swapping them.

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   A prime benefit of using Porter’s model is that it assists inunderstanding how value is divided between competitors and additionallyincludes information about redistribution of profits. The framework takes intoconsideration a wide perspective on competition and does not only focus on currentchallenging firms. Porter’s Five Forces model draws attention to the externalenvironment rather than internal focus and provides a context further away anindividual product or variety of products. A disadvantage of the model is the fact that it only considerssituations in which an industry operates in quiet environments and does notconsider disruption within the market. Additionally it focuses mostly on firmsseeking competitive advantage over competitors and eliminates other drivingfactors. Consumers like providers are not linked together, often operateoutside of the industry network.

Moreover Porter’s model does not broaden itsoutlook on resource, which could have an influence on the redesign of an industry. The SWOT Analysis A further well recognised strategy analysis tool is namelythe SWOT Analysis. The abbreviation SWOT is formed from the initial letters ofwords: strengths, weaknesses, opportunities andthreats. Its main function is defined by Bohm (p.1) as ‘The SWOT Analysispursues an integrated approach including key company and environmentalvariables. The strengths and weaknesses of the company are analysed in orderaid successful progression and growth.  Strengths and weaknesses are internal factorsof the company environment.

Strength describe all factors which havesignificant impact on development of the business to achieve a sustainablecompetitive advantage over competitors. Strengths can also include thosefactors which have previously aided the progression of the company.  Whereas weaknesses are elements, which can beused by a rival company.  According to the SWOT Analysis, opportunitiesand threats are external, out of control factors, which occur “due to thechanges in the macro environment”. Opportunities are elements, which can behelpful to achieve a business’s objectives. While threats may harm a company inany possible way. The main advantages of using SWOT Analysisare: Problem domain – SWOT Analysis can be used by a business organisation,single person or group of people to support different project objectives. Forexample appraise a product or brand, an acquisition or partnership.

  Therefore it is flexible and adaptable. Cost efficiency – carrying out a SWOT Analysis does not requirespecially trained personnel. A company can choose one of their staff member toavoid hiring an external specialist.Application neutrality – The main aim of SWOT Analysis is tofind an objective and identify internal and external elements, which can havepositive or negative impact on the realisation of an objective, irrespective ofwhether it is used to “support strategic planning or product developmentprocess”. Multi – level analysis – All four elements of SWOT Analysis –strength, weaknesses, opportunities and threats can be considered independentlyor in combination. For instance an identified threat in a business environmentsuch as a new government rule concerning a product design could influence a businessowner’s decision in regards to introducing a new manufacturing production lineby being cautious about the project.

 Disadvantages of using SWOTAnalysis are:NO weighting factor – SWOT Analysis does not clearly specify,which of the four elements have significance in contrast with another factor,which can have a negative effect on the objective of a business.Subjective analysis – Data used to carry out a SWOT analysis canbe biased because it is collected by individuals participating in a groupdiscussion to produce ideas. In addition data can become outdated rapidly.Ambiguity – SWOT Analysis allows to recognise factors andestablish which of these four factors have positive or negative impact on thebusiness strategy. Only one considered issue can be a strength or weakness whetherit is opportunity or threat.

However in reality one problem might be consideredas a strength or weakness at the same time.  Conclusion In conclusion Porter’s five forces model aswell as SWOT Analysis model are both business strategy tools widelyused by firms to achieve a competitive advantage and execute strategic analysis.The Porter’s model is often used to evaluate an automotive industry or can beuse in the banking sector. While SWOT Analysis is oftenuse in retail industry. Both models have strengths and weaknesses, however abusiness should consider which tools would be most effective in achieving theirpersonal objectives.

  

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