Porter’s Five Forces
Framework is a tool for analysing competition of a business. It draws from
industrial organization economics to derive five forces that determine the
competitive intensity. Porter consists of those forces close to a company that
affects its ability to serve its customers and make a profit. A change in any
of the forces normally requires a business unit to re-assess the marketplace
given the overall change in industry information. The overall industry
attractiveness does not imply that every firm in the industry will
return the same profitability. Firms are able to apply their core
competencies, business model or network to achieve a profit
above the industry average.


Threat of New Entrants

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Profitable industries
that yield high returns will attract new firms. New competitors may force
existing firms to be more efficient and to learn how to compete on new
dimensions. These entry barriers make it difficult for new firms to enter an
industry and often place them at a competitive disadvantage even when they are
able to enter. The most attractive segments is one in which entry barriers are
high and exit barrier are low which that high barriers to entry almost always
make exit more difficult. For Produa Manufacturing Industry, the potential
factors that faced by Produa Industry are economics of scale which are
flexibility in pricing and market scale, product differentiation which promote
unique products, capital requirements differ according to industry, and
switching costs which one-time costs customers incur when Produa industry is
buying from a different supplier.


Threat of Substitute Products

A substitute product uses
a different technology to try to solve the same economic need. The substitute
product’s price is lower, quality and performance are equal to or greater than
the existing product. The factor that faced are number of substitute products
available in the market, buyer propensity to substitute, relative price
performance of substitute and buyer’s switching costs. Therefore, if there have
high threat of substitute products, there is higher the possibility for Produa
industry to have loss in profit.



Bargaining Power of Buyers

The bargaining power of
buyers also described as the market of outputs: the ability of buyers to put
the firm under pressure, which also affects the customer’s sensitivity to price
changes. Firms can take measures to reduce buyer power, such as implementing a
loyalty program. Buyers’ power is high if buyers have many alternatives. It is
low if they have few choices. The buyer power increases when the Produa
products are undifferentiated or standardized. Buyers pose a credit threat to
integrate backward into the sellers’ industry. For example, buyers might
influence by price which buyers wants the cheap and adorable car. They also
have the option to choosing types of cars, colour and others additional


Bargaining Power of Suppliers

The bargaining power of
suppliers is also described as the market of inputs. Suppliers of raw
materials, components, labour, and services to the firm can be a source of power
over the firm when there are few substitutes. The supplier power will increases
when supplier’s products create high switching costs. Besides that, suppliers
also have substantial resources and provide a highly differentiated product and
pose a credible threat to integrate forward into the buyers’ industry.


Intensity of Rivalry among

For most industries the
intensity of competitive rivalry is the major determinant of the
competitiveness of the industry. Having an understanding of industry rivals is
vital to successfully market a product. Positioning pertains to how the public
perceives a product and distinguishes it from competitors. A business must be
aware of its competitors marketing strategy and pricing and also be reactive to
any changes made. Firms seek to differentiate their products in ways that
customers value and in which the firms have a competitive advantage. Common
rivalry dimensions include price, service after the sale, innovation and etc.
Rivalry among existing competitors is high when competition is fierce in a
market and low when competition is more complacement.




3.3  Internal Environment



The resources have two
components which are tangible resources and intangible resources. The tangible assets
that have in Produa industry are financial resources that enable the firm’s
capacity to borrow and generate internal funds. Besides that, they also have
technological resources which are stock of technology such as patents,
trademarks, copyright and trade secrets. While intangible resources include of
knowledge; trust; skills; and collaborative abilities in human resources,
innovation resources in scientific capabilities and capacity to innovate, and
the last is reputational resources in brand name; perception of product
quality, and reliability.




Functional Areas



ü  Adequate training ensuring stable source of skilled manpower
ü  Automated manufacturing process
ü  Maintenance for technical competence

Marketing & Sales

ü  Conduct various and promotions activities
ü  Advertisement in media
ü  Provide panel of finance and insurance for customers
ü  Showrooms are available


ü  Have follow-up service for customers
ü  Service information and service package provided for customers
ü  Easy availability of spare parts

Human Resource Management

ü  Encourage in teamwork and employees to develop ideas for greater
efficiency and productivity
ü  Ensuring regular specialized training is provided for success
ü  Reward staff performance
ü  Provide a conducive working environment






Core Competencies


Core Competency is a deep proficiency that
enables a company to deliver unique value to customers. It embodies an
organization’s collective learning, particularly of how to coordinate diverse
production skills and integrate multiple technologies. Core Competency also
creates sustainable competitive advantage for a company and helps enable an
organization to access a wide variety of markets. There is two tools firms use
to identify and build core competencies.


Ø  Four Specific Criteria of Sustainable Competitive
Advantage which capabilities must need to fulfil the four criteria in order to
be core competencies are valuable, rare,
costly-to-imitate and non-substitutable capabilities.

Ø  Value Chain Analysis is a strategy tool
used to analyse internal firm activities. Its goal is to recognize, which
activities are the most valuable (the source of cost or differentiation
advantage) to the firm and which ones could be improved to provide competitive
advantage. In other words, by looking into internal activities, the
analysis reveals where a firm’s competitive advantages or disadvantages are.
The firm that competes through differentiation advantage will try to perform
its activities better than competitors would do. If it competes through cost
advantage, it will try to perform internal activities at lower costs than
competitors would do. When a company is capable of producing goods at lower
costs than the market price or to provide superior products, it earns profits.


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