Porter’s Five Forces Model
The industry can be analyzed as different sets of businesses that satisfy the varying needs of customers. Industry can be defined by brand competition, product competition, form competition, and generic competition. The success in a business like the MB Tech, which usually operates mainly for marketing and the acquisition of high profits, is dependent on the management and the establishment of all the products and services that are being offered by the business (Ehmke et al., 2004). For a business to be able to compete and survive in the competitive market, it has to be very successful in paying attention to the attractiveness and the unattractiveness of the industry in which it operates through the use of the Porter’s five forces analysis. The success of a business or an organization can be defined by the constant innovation and development of the business’s product and service lines and the increasing clientele numbers.
In the Porter’s five forces analysis, it was realized that in the computer systems design services industry the competition is very tough and intense and there is a very high attraction to other potential entrance in the market. The industry attractiveness does not show that the companies and firms that operate in such type of industry will have the same profit margins and if MB Tech is able to apply its competencies, the company will be able to achieve a very high profit margin, which above all the other companies’ profit margin. The main aim and objective of any business or organization is the profit maximization (Porter, 2008). Porter (2008) identified a total of five factors which determined competition within an industry.
Overview of the Porter’s Five Forces Model
Threat of Substitute Products (HIGH)
The threat of substitutes from competitors is very high because we are still a new brand in the market and we still have not yet established our own loyal customers. This is because the consumers may end up preferring the substitute consulting services from our close competitors to our services. Our business has to come up with unique and extraordinary consulting services which are much better in quality than the ones of our competitors. MB Tech has to come up with a very strong customer loyalty program, so that it can be able to position its services against all the substitute services in order to maintain a competitive advantage.
Bargaining Power of Buyers (HIGH)
Buyers have a very high bargaining power, because they can easily switch from one brand to the other. Internet access has made it very easy for many customers to be able to get all the information that they need concerning a certain product or service (Ehmke et al., 2004). This may make the consumers to be price sensitive in that some consumers may opt to buy the relatively cheaper products and services, which shows that if MB Tech has to make high sales, it has to sale at the lowest prevailing market price, which can make the business to run at extremely low profits or even realize losses. On-line shopping has increased the bargaining power of many buyers who can access the internet.
Bargaining Power of Suppliers (HIGH)
The bargaining power of suppliers usually depends on the relationships which exist between the two parties. It affects the prices, quality, and delivery times when ordering the products in large amounts. As we are a new brand in the computer systems design services industry, it shows that we have to like all the suggestions that the suppliers offer us because they have choice not to work with us, which shows that their bargaining power is very high and we may end up losing our supplier.
Threat of New Entrants (HIGH)
The threat of new entrants into the market is very high in the computer systems design services industry as the industry’s market is rapidly growing and there are many incoming businesses venturing into the industry. There are new information and technology consulting companies coming up each year, which now becomes a challenge to our business since it is just new in the industry and it may take a very long time for us to be able to get a strong position and become one of the best consultant companies in the U.S. computer systems design services industry.
Intensity of Rivalry (HIGH)
Industry rivalry in the computer systems design services industry is usually very high because of the existence of intense competition. In this case, the industry slows down which further intensifies the competition levels between the competitors and also leads to the shortening of the product life cycle (Porter, 1998). Rivalry is considered to be a great threat to a company since it affects the company’s profitability levels, where in a case of price competition, the profits are transferred directly from the industry to the customers (Porter, 2008).
In conclusion, for a business or a company to gain a sustainable competitive advantage, which is the prolonged benefit that a firm possesses and achieves by the creation of new products and services that are valued and targeted by the market and they cannot be replaced easily or even duplicated by the competition. It requires that a company or a business unit to be able to erect suitable barriers against competition by looking at the basis of competition and who the business is competing against (Porter, 1998). MB Tech has been able to have a sustainable competitive advantage because of its efficient market hypothesis and its consideration of its price volume relation in terms of stock prices in the stock markets.