THE INDUSTRY STRUCTURE AND THE FIVE PORTER'S FORCES

1) CONCEPT:

INDUSTRY:"Economic activity concerned with the processing of raw materials and manufacture of goods in factories"*

FORCE:"Strength or energy as an attribute of physical action or movement"**

STRUCTURE:"The arrangement of and relations between the parts or elements of something complex"***

GLOBAL INDUSTRY:"A global industry is one in which a firm's competitive position in one country is significantly affected by its position in other countries"****

2) QUESTION: Which are the five Porter's forces and why are relevant for the industry?

ANSWER: The five Porter's Forces is a holistic model that allows the analysis of any industry in terms of profitability. It was developed by the economist Michael Porter in 1979, according to Porter, the rivalry with competitors is determined by four elements or forces that combine to create a fifth force: rivalry among competitors.

"This model holds that the nature of competition in an industry is the combined outcome of the competitive pressures generated by (1) the moves of rivals battling for market share, (2) the entry of new rivals seeking market share, (3) the efforts of others companies outside the industry to convince buyers to switch to their own substitute products, (4) the push by input suppliers to charge more for their inputs, and (5) the push by outputs buyers to pay less for products. Collectively, the five forces model develops a picture of the structure and competition in an industry that prepares managers to figure out what fundamental forces shape strategic conduct, how strong each force is, what forces are driving changes in the in the industry, what strategic moves rivals  are likely to make next and what the key factors are for future competitive success."*****       

If you like to know more about this image, you can check this video where M. Porter explains clearly his theory about the five forces  http://sciencestage.com/v/13871/the-five-competitive-forces-that-shape-strategy.html

The five Porter's forces are very important because allow the asessment and the analisis of an industry structure and provide to the company the basis for estimating the kinds of strategic moves for implementing in the industry.

Strategies must be very dynamic because the traditional sources of advantages do not provide long-term security, the traditional barriers to market entry are being overcome by competitors fastly. The strength of a strategy is not determined by the initial movement, for this reason companies must anticipate and face the strategies and reactions of competitors and changes in customer demands over time.

3) POINT OF VIEW: I believe that all companies should make a thorough analysis of the industry in which they are, this model that M. Porter raises, is very important to determine the advantages and disadvantages that can have an industry, and to raise and implement appropriate strategies.

The success of the strategy depends on how effectively it can manage the changes that occur in the competitive environment, flexibility and adaptability are very important. Globalization and technological change are creating new forms of competition, deregulation is changing the rules of competition in many industries of many countries, markets are becoming more complex and unpredictable, flows of information in a highly interconnected world are allowing companies detect and react to the competitors much faster.

In conclusion I would say that the rapid competition is telling us that it is not possible to wait for the action of the competitor for us to decide how we will react. What we must do is to anticipate and prepare to face any eventuality, every movement has to face competition quickly, because any advantage is temporary.

___________________________________________________________
*Oxford Dictionaries.(2010).Industry.[Online]: http://oxforddictionaries.com/view/entry/m_en_us1257864#m_en_us1257864
**Oxford Dictionaries.(2010).Force.[Online]: http://oxforddictionaries.com/view/entry/m_en_us1248351#m_en_us1248351
***Oxford Dictionaries.(2010).Structure.[Online]: http://oxforddictionaries.com/view/entry/m_en_us1295059#m_en_us1295059
****Daniels, John D (2004). International Business:Environments and operations.Chapter 11: The Strategy of International Business.p 375.
*****Daniels, John D (2004). International Business:Environments and operations.Chapter 11: The Strategy of International Business.p 378.




-Image 1: GettyImages.Elements of global communication.(2010).Available at: http://www.gettyimages.com/detail/10013540/The-Image-Bank
-Image 2: Quickstep. The Five Forces That Shape Industry Competition.(2010).[Online]: http://qwickstep.com/search/porter-five-forces.html  

view this video http://sciencestage.com/v/13871/the-five-competitive-forces-that-shape-strategy.html