Using Five Forces For Success

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five forces model

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By: lawsst2004 (108 month(s) ago)

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STRATEGIES FOR SUCCESS FORCES THAT IMPACT ON SUCCESS

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Michael Porter provided a framework that models an industry as being influenced by five forces. Designers seeking to be successful can use this model to better understand the industry context in which the they operate. The more you understand about the strength of each force, the better able you will be to respond to factors that will affect your success. http://www.ces.purdue.edu/extmedia/EC/EC-722.pdf

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IMPACT OF THE FIVE FORCES ON THE DESIGNER

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http://www.oceanbluemultimedia.com.au/ FIVE FORCES ANALYSIS FOR A FREELANCE DESIGNER

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4 3 1 5 2

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How Much Negotiating Power Do Your Buyers Have? This is how much pressure customers can place on a business. If one customer has a large enough impact to affect a company's margins, then the customer hold substantial power. Here are a few reasons that customers might have power: > Small number of buyers >Purchases large volumes >Switching to another (competitive) product is simple >The product is not extremely important to buyers; they can do without the product for a period of time

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How Easy Is It for Businesses to Enter Your Market? The easier it is for new companies to enter the industry, the more cutthroat competition there will be. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include: > Existing loyalty to major brands > Incentives for using your business > Scarcity of resources > High costs of switching companies

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What Products Could Your Customers Buy Instead of Yours? What is the likelihood that someone will switch to a competitive product or service ? If the cost of switching is low, then this poses a serious threat. Here are a few factors that can affect the threat of substitutes: > The similarity of substitutes e.g. template vs. customised > Personalised vs. remote

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How Intense Is Your Competition? This describes the intensity of competition between existing firms in an industry. A highly competitive market might result from: > Many players of about the same size; there is no dominant firm >Little differentiation between competitors products and services >A mature industry with very little growth; companies can only grow by stealing customers away from competitors

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How Much Power Do Your Suppliers Have Over You? This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a company's margins, then it holds substantial power. Here are a few reasons that suppliers might have power: > There are very few suppliers of a particular product > There are no substitutes > Switching to another (competitive) product is very costly > The product is extremely important - you can't do without it

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PORTER’S GENERIC SUCCESS STRATEGIES Michael Porter has argued that there are three generic strategies for achieving business success: cost leadership , differentiation , focus .

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Cost Leadership Strategy This generic strategy calls for being the low cost producer for a given level of quality. The firm sells its products either at average industry prices, or below the average industry prices to gain market share.

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Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product.

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Focus Strategy The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.

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A Combination of Generic Strategies - Stuck in the Middle? These generic strategies are not necessarily compatible with one another. If a firm attempts to achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. Michael Porter argued that to be successful over the long-term, a firm must select only one of these three generic strategies. Otherwise, with more than one single generic strategy the firm will be "stuck in the middle" and will not achieve a competitive advantage.

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http://www.oceanbluemultimedia.com.au/ Develop a Success Strategy COST – DIFFERENTIATION – FOCUS ?

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