What is Five Forces Analysis? Describe each in detail and use your own small example to illustrate. The Five Forces Analysis is Porter’s model and is used in a business situation. The purpose of this analysis is to diagnose the competitive pressures in a market and assess how strong and important each one is to the firm. This analysis consists of; Threat of New Entrants,Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitute Products, Threat of Potential New Entry, and Competitive Rivalry. Threat of New Entrants is the first part of the Five Forces Analysis.
New Entrants have a barrier of entry and could be extremely difficult at times. Some difficulties are; the economies of scale of existing firms, product differentiation and design, capital requirements is high, access to distribution channels, protection for key technologies, and threats can be high if the previously stated difficulties. Bargaining Power of Supplier is the second part of the Five Forces Analysis. Supplier power is very important to an industry because they are a threat to raising prices but reducing the quality. There are various situations in which suppliers are powerful.
They are; suppliers are dominated by a few firms as an only source, they have few substitutions, the buyer isn’t an important customer to the supplier, the product is important to the input to buyers’ products, and suppliers pose a credible threat of forward integration. The company Apple is a good example of this because their products are on such high demand the suppliers need to make sure they are constantly producing the products. Bargaining Power of Buyers is the third part of the Five Forces Analysis. There are a few different ways that buyers compete in a supplying industry.
They are; bargaining down prices, forcing higher quality, and playing firms off of each other. Buyer groups are powerful when they are concentrated or purchases are large relative to seller’s sales, purchasing accounts for a significant fraction of supplier’s sales, and products are undifferentiated and have other products that are similar. Also, the buyer presents a credible threat of backward integration and they have full information on costs. Bargaining power of buyers allows consumers to pick and choose what they want to buy. Location and the type of product can influence bargaining power.
For example; the Apple store is a great location because it is in the mall and there is a lot of traffic in the mall so it draws consumers into the store to buy their products. Threat of Substitute Products is the second to last part of the Five Forces Analysis. The main key to evaluate substitute products is to have products with improvement of price or performance. Products with similar function limit the prices that firms can charge. Finally, the last section of Porter’s Model of the Five Forces is the Rivalry Among Existing Competitors.
Competitive rivalry could become very intense because there is price competition, advertising battles, increasing consumer warranties or service, making new product introductions, and a firm is pressured to take opportunities. But their are some issues that need to be considered against your existing competitors. Price competition could hurt the industry competition and advertising battles may increase total industry demand, but may be costly to smaller competitors. 2. What is SWOT analysis? Describe each in detail. SWOT Analysis helps a company identify its strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses create or destroy a company’s assets, skills, or resources a company has close to their competitors. Some examples of strengths could be marketing expertise, new, innovative products or services, business destination, quality of processes and procedures, and any other aspects that adds value to your business. Examples of weaknesses are; lacking marketing expertise, undifferentiated products or services, poor business location, poor quality goods or services, and having a damaged reputation. Opportunities and Threats are external values that cannot be controlled by a company.
They are factors that can be emerged from competitive dynamics of the industry/market or from demographic, economic, political, technical, social, legal or cultural factors. Some examples of opportunities in a company are; developing markets, mergers, joint ventures, or strategic alliances, using new market segments to improve profits, use a new international market, and using a market that is being vacated by an ineffective competitor. Examples of threats are; a new competitor coming into your home market, price wars with a competitor, as well as them having a new innovative product or service.
Also, competitors have superior access to channels of distribution and taxation could be introduced on your product or service. 3. What is I-PEST analysis? Describe each in detail. I-PEST analysis consists of various dimensions of a company. The different dimensions are; international factors, political factors, economic factors, social-cultural factors, and technology factors. The International dimension represents events originating in foreign countries and regions as well as opportunities and challenges.
Some issues that managers must consider in this type of dimension are; international competitors, customers, and suppliers, social, technical, and economic trends and needs, and general environment in a specific interested country and the region. The political dimension is the second factor in I-PEST analysis. The government regulates at local, state, and federal levels. Pressure groups do a good job in influencing the government and companies. Some questions that are asked are; How stable is the political environment? Will government policy influence laws that regulate or tax your business?
Is the government involved in trading agreements such as the European Union, North America Free Trade Agreement, or others? Economic dimension is the third factor in this analysis. This part of the analysis represents the general economic health of the country. It reflects consumer purchasing power, unemployment rates, interest rates, and level of inflation but they are also short and long term. The fourth factor in I-PEST analysis is socio-cultural. Socio-cultural dimension covers demographic characteristics, norms, customs, and values of the general population.
Other characteristics include; geographical distribution, population density, age, and educational levels. Questions that are asked are; What are attitudes to foreign products and services? How much time do consumers have for leisure? What are the roles of men and women within society? and Do the population have a strong/weak opinion on green issues? Finally, technology dimension is the last part of the I-PEST analysis. The technology dimension are scientific and technological advancements in a specific industry as well as in large societies.
Some questions that should be considered are; Does technology allow for products and services to be made more cheaply and to be better standard of quality? Do the technologies offer consumer/businesses more innovative products/services, for example; internet banking, new generation mobile telephones, etc? and Does technology offer companies a new way to communicate with consumers: online 24hour help,customer relationship management, etc. 4. What is organizational structure? Please describe the 5 basic structure in organizations(e. g. functional, matrix, team- bases… )
An organizational structure is made up of three different levels; The set of formal tasks, formal reporting relationships, and the design of systems. The first level, the set of formal tasks, is assigned to individuals and departments such as research and design, engineering, accounting, and finance. The 2nd level deals with formal reporting relationships. This includes lines of authority, decision responsibility, such as; levels of managements. The third level is the design of systems. This level deals with effective coordination of employees through all departments within an organization.
Along with the three levels, there are four important features of an organizational structure. The four features are; work specialization, chain of command, span of management and centralization and decentralization. Work specialization is the degree in which organizational tasks are subdivided into separate jobs to improve efficiency. The second feature, chain of command, is the authority that links all employees of an organization. Span of management is the third feature. This feature can have tall or flat structures. Tall structures have a narrow span of management and more levels of hierarchy.
A flat structure has a wide span and is horizontally dispersed with fewer levels. There is a scale that is associated with span control and is as follows: work is stable or routine, similar task is performed by everyone, a single location, and employees are highly trained. Finally, Centralization and decentralization is the last feature in the organizational structure. Centralization is a decision made by a higher level of authority and decentralization is a decision that authorities push down the chain of command to lower levels.
Decentralization comes with many risks which are potential agency problems, coordination costs and failures among different divisions, and less effective use of central information. Potential agency problems are an effective control system that may be expensive in terms of both money and time but sometimes its an even loss of central control. Coordination costs and failures among different divisions is information sharing becomes difficult and time consuming and conflicts of interest from different divisions like local vs. global.
There are five approaches to structural design; vertical functional, divisional structural, matrix structure, team based structure, and network structure. Vertical functional is a well-known traditional method that is based on functions of an organization. It is easy and simple to control and it is the basic structure for advanced designs. The divisional structure deals with various departments of an organization. It can be is based off of manufacturing, human resources, accounting and product lines of the firm. The divisional structure is a horizontal extension of base functional structure and clarifies rights and responsibilities.
An organization also wants to check the disadvantages and any possible alternatives. The matrix structure is very popular and has improvement between communication and coordination. Also it saves costs by reducing overlaps. Its interests and order conflicts come from different sources and bureaucratic structure slows down decision making. The fourth structure is the team based structure which allows employees from the different functional departments to get together and resolve any problems that they may encounter. This is also known as an interdisciplinary approach.
The team based structure is important because it involves knowledge and information inputs. This structure is suitable for products, supply chain management, and project management. The team approach has advantages and disadvantages. Some of the advantages are reducing barriers among departments, knowledge and information inputs, less response time, may have quicker decisions, and they reduce administrative overhead costs. Some of the disadvantages are dual loyalties and conflicts of orders, time and resources spent on meetings, and unplanned decentralization of power.
Finally, network structure is the last approach to structural design. Network structure is more popular for online use such as Amazon, Ebay, Half. com, etc. The network is the central hub and works as the interface and controls all other functions. The main focus is on core business competencies and outsource other activities. A virtual network is part of the network structure but has its advantages and disadvantages. Some of the advantages are; worldwide expertise, global based resources, high flexibility, and reduced administrative overhead.
The disadvantages are; no hands on control, heave reliability on contracts, coordination, negotiation, electronic linkages, and weakened employee loyalty. Briefly tell me what did you learn from the class and how do you feel it in general less than 250 words. I felt that this class was an important class to take as a business major. It helps you gather all your knowledge from all the other core classes and using it in the business simulation game. In my personal opinion, I felt that the simulation was hard When introducing a new product to the market it is important to research and develop it.
Also they way you market a product to the public effects how successful a product will be. The more you promote a product the more awareness the public would have. FInancing is also very important to a company because you have to have the money in order to introduce new products, to keep older ones on the market, and also allows you to keep a record on your stocks, bonds, and any debt that the company may encounter. me to get acquainted with. But, it gave me a general idea on how to run a business.