Porter’s Five Forces

Porter’s five forces refer to a framework used for industry or company analysis and development of business strategy. This analysis together with generic strategies and value chain form part of Porter strategic models. These five forces include new entrants’ threat, substitute services or products’ threat, bargaining power of buyers or customers, suppliers bargaining power and competitive rivalry’s intensity (Porter, Pg 50).

The point

The main reason for the development of these five forces was in response to the famous SWOT analysis. The analysis helps to determine the intensity of competition and hence the market’s attractiveness. All these forces refer to a certain form of competition either from within or from outside the company. They have an impact on the company’s ability to provide services to customers and at the same time make profit.

How a company (Social Networking) can use Porter’s Analysis

A company, especially a Social Networking, can use these marketing and customer relations to enhance the level of their services (Dwyer, Pg 23).  

The Point

The whole essence of applying these forces is to realize the kind of threat they face from their competitors. They also get an opportunity to assess the internal conflicts that affect them as a company.

Explain the techniques

New entrants’ threat: Whenever a business venture yields huge profits, more firms or industries tend to venture into that field. This leads to reduced profits to the previously dominant company.

Substitute services or products’ threat: The presence of products that lie outside the common products’ realm tends to increase the chances of customers making a switch to the alternative products.

Buyers’ bargaining power: This refers to the customers’ ability to pressurize the company or industry. This is also a factor in the sensitivity of customers to changes in prices.

Supplier’s power of bargain: In the case of a few substitutes for the suppliers of raw materials or services, there is tendency for them to apply high prices or refuse to work with the firm.

Competitive rivalry’s intensity: This is the most effective determinant of an industry’s competition. It greatly affects the kind of approach that a company takes to counter the looming threat.      

Analysis of two forces of the Strategy Business Unit (SBU)

SBU entails advertising within social networking site. The two main forces are revenue and marketing. Revenue involves the amount of income that a firm aims to gain from any business gesture. In an attempt to achieve this target, the company employs one f the strongest marketing strategies. These two aspects are of great essence in the kind of product and market section.

Rivalry

The competitors to Facebook as a social networking company include twitter, NING, google+, MySpace, bebo, and LinkedIn, among several others.

Facebook is stronger and is widely considered as number on social networking site. It has a great market penetration covering almost every country in the world. It is of estimate that it receives more than seven hundred and fifty million visitors daily. It clearly takes most of the market share in comparison to the individual rivals.

Subscription and use of Facebook accounts is free. The only charge involved is the amount of money paid for data connections. This is similar to the competitors. The kind of technology used by the competitors is inferior and not as innovative as that of Facebook. Its nearest rival, twitter, allows subscribers to only posts their views as opposed to Facebook, which offers a platform for event or page creation.

The market is quite concentrated with intense rivalry. Therefore, there is high force of competition among these companies.

Threat of Substitutes

Substitutes include the emailing firms such as yahoo and Gmail. These companies not only provide a chance to share but also send important documents.

The customers consist mainly of people who chat and seek a site to express what is on their minds. There is always a possibility of finding substitutes.

The products to serve as substitutions are of great quality as well. They offer a greater form of diversification.

The market is static now with customers comfortable with their current situation. However, the wave of change to substitute market is creeping in slowly.

This force is quite low. Statistics indicate very manner daily activities regarding firms within the SBU as opposed to the substitutes. While yahoo has ten million daily users, Facebook has hundreds of millions.

Corporate Governance

A company is most likely to fail because of recessions, high levels of competition from similar businesses, and poor decisions by management, several regulations and high levels of taxation. JJB went into administration in October, 2012. It had debts totaling to millions of pounds. This led to the sale of about twenty stores to their arch rivals Sports Direct, hence saving over five hundred jobs. However, with the closure of one hundred and twenty stores and more than two thousand job loses and loss of money by shareholders, it is still considered as a great failure in the corporate world.

Comet, entered administration in November, 2012. The company’s fall resulted from decreased purchasing power from the customers. This resulted in the closure of more than forty stores with more than five hundred employees directly affected. Another corporate failure is Tesco. Its USA branch failed in April, 2013. The company’s attempt to conquer American market failed as buyers did not appreciate the mode of packaging nor did they prefer the online purchases. This led to a loss of more than 1.2 billion dollars by the company and several jobs lost. Hbos failed because of poor management. Poor decision making, flawed culture and bad strategies characterized this failure. This was in April, 2013. This led to several parliamentary debates into this issue. Lloyd bailed out this company. Lastly, Lehman brothers filed for bankruptcy in September, 2008. The company sold its assets to Barclays bank following a court ruling. This resulted in depreciation in the real estate prices, fall in stock market and huge loses by the numerous investors.