Porters five forces
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Porters five forces
Executive summary
The Porters five forces are important tools in strategic management and therefore firms should consider the forces in their management strategies. In order to develop an effective management strategy a firm should consider the interactions of the five forces within a business. This paper therefore presents a report on a research conducted on the Australian Fashion industry with reference to Ku-De-Ta. The paper also provides recommendations for the new firm according to the research findings and projections. The paper begins by an analysis of porter's five forces in relation to the new business and its proposed strategies. Secondly, the paper provides recommendations on the new business according to the recommendations provided in the research. The paper also looks at Hofstede's five forces in consideration to the proposed staff in the new business. In addition, the analysis provides recommendations to the firm concerning the proposed staff according to Hofstede. Finally, the paper provides a summary of major points and recommendations from the research findings.
Outline
Title page---------------------------------------------------------------------------------------------------1
Executive summary---------------------------------------------------------------------------------------2
Outline------------------------------------------------------------------------------------------------------3
Introduction------------------------------------------------------------------------------------------------4
The Porter's five forces-----------------------------------------------------------------------------------4
Hofstede's dimensions-----------------------------------------------------------------------------------9
Conclusions-----------------------------------------------------------------------------------------------11
References------------------------------------------------------------------------------------------------13
Introduction
Although Ku-De-Ta ltd is a well established business it operates in a highly competitive market and therefore it needs to have a well-defined competition strategy. The industry in which the organization operates is also a dynamic industry and therefore the organization needs to be able to cope with the pressure resulting from these changes and consumer needs. As stated by (Greiner, 1972) the modern market is competitive and therefore a business need to have a well-defined survival strategy (72). With a good survival strategy, the organization will be able to compete favorably to achieve the desired growth. The managers of the company therefore need to apply the porter's five forces in order to develop a strategy that will enable the company to exist and perform well in the market. The company also needs to apply the Hofstede's cultural dimension to determine the suitability of the staff in the new firm. This paper therefore presents a report on a research conducted by consultants contracted by the company basing on porter's five forces and Hofstedes' cultural dimension. The report also provides recommendation that the managers of the firm need to apply in order to run the firm effectively.
The porter's five forces
Although Ku-De-Ta is a well-established firm with adequate resources, the Fashion industry in which it aims to venture is competitive and therefore it has to consider rivalry in the industry as the main factor for the new business. According to (Smither and Reilly, 2005) competition among rival business is the most important factor to consider when establishing a new business (76). From the research, it was established that the company was aware of this factor and therefore it had to take all the necessary measures in order to take care of the competition.
The study proved that the Australian Fashion industry had fixed cost for its products and this cost factor promoted rivalry among the firms operating in the industry. These factors make the Australian fashion industry to have high rivalry among competing firms and hence unattractive for new ventures. Following this rivalry, the firms operating in the market were forced to apply several measures such as advertising in order to attract and retain customers. The firms in the market also applied cost-varying mechanisms in order to win customers in the industry. In addition to this, players in the market applied the quality factor and product differentiation to attract buyers. The research also proved that these measures taken by the operators of the industry were important in promoting growth in the industry but they added an extra operating cost to the business and therefore lowered the profit margin. The application of intensive sales promotion made the industry unattractive to new ventures. The rivalry among the firm in the industry also threatened new entrants into the market. Well-established companies such as Australian Fashion Group (AFG) posed a major threat and therefore Ku-De-Ta needs to consider its competitive ability before venturing into the new market.
The suppliers are very important in any industry since they control operations of the existing business. The relationship between the suppliers and operators of the industry also determines the competitive power of a firm (Kerr, 2004 pp. 102). From the analysis conducted, businesses operating in the Fashion industry collaborated with the suppliers of their products such as design equipments in order to create a monopoly in supply. The firms operating in the industry manipulated the suppliers of essential products in order to control essential products and therefore gain competitive power over their rivals. The Australian fashion industry therefore has a low power of suppliers and this factor makes it attractive.
The research also found that firms operating in the industry were almost equal in their operation status and standards. The study also proved that most of the firms operating in the Australian Fashion industry were almost of equal strength and the industry lacked market leaders. The lack of market leaders in the industry was the main factor that determined the rivalry among the firms in the industry. The availability of competing firms within the textile industry also contributed to rivalry in the industry. Advertisement and other methods of sales promotion taken by the firms operating in the industry was found to have the effect on their profit margins and this made the industry unattractive to some firms. The research also proved that although the massive sales promotion made the industry to be unattractive it was attractive to some players especially the established businesses.
The other important factor that the new firm needed to consider in the Australian Fashion industry is the threat of new entrants and this is the second important force. The new business was to be considered as a new entrant into the Fashion industry and therefore it has to consider the ease of new entrants into the Fashion industry. According to the research, the Fashion industry had several barriers that made the Fashion industry unattractive to new entrants. To begin with, the Fashion industry was highly regulated by the authorities and had strict requirements and measures (Shaw, 1990 pp. 12). The analysis also revealed that the authorities required that all firms in the industry should have certain basic requirements in order to be granted operational lenience. The study showed that the firms in the industry needed to have a minimum starting and operating capital. The research led to the conclusion that the Fashion industry is capital intensive and therefore unattractive to many first-time investors. The fashion industry has low threat of new entrants and therefore new business can penetrate easily.
Buyers are very important players in any industry and therefore any firm in the industry should consider the characteristics of buyers to determine its market strategy. The power of the buyers proved to be the third important force that the new business needs to consider. According to the survey, buyers have high power in the fashion industry due to the availability of substitute from the competitors. Secondly, the research established that firms operating in the industry considered the power of the buyers in their business strategies and therefore the new business needs to consider the power of the buyers.
The research found out that the buyers in the industry had an eye for the brand and this enhanced their loyalty to particular products. Secondly, the buyers of the Fashion industry were sensitive to prices paid for design products and services. From the survey, buyers were also keen on the quality of the product and this enhanced differentiation of products in the industry. The research also established that the industry did not have large-scale buyers and therefore the buyers lacked bargaining power. The research also proved that the fashion industry lacked corporate buyers and this contributed to the low bargaining power of buyers. The low bargaining power in the fashion industry makes it an attractive industry for new ventures like Kudeta. From the research, buyers in the Australian Fashion industry have moderate influence and hence moderate power in the industry.
Availability of substitutes was the next important force that the new business needed to consider before entering into the new market. From the research results, the Fashion industry had high threat from substitute and therefore it was an unattractive industry. The Australian fashion industry has cheap products that are of relatively low price, which makes it difficult to launch new products. The research also verified that the Fashion industry offered clothing as its main products and therefore substitute could only come in as a variety to the products offered in the market.
From the research findings, the Australian clothing market was very conservative and therefore the buyers in the market were unwilling to try new products. The research also established that the authorities and the Fashion industry controlled new products in the industry discouraging the availability of substitute. The fourth important force that was considered in the research was the power of suppliers in the Australian Fashion industry. From the survey, it established that the Australian Fashion industry had no disintegrated suppliers and therefore they had average power in the industry. The survey also established that the suppliers of the Fashion industry lacked a formal organization and therefore they had minimal control on the market. From the findings, suppliers in the industry had little or no control on the distribution channels and therefore they had little effects on the industry. Although the supplies of the Fashion industry had little control on the purchases made by the players of the industry, the research found out that most firms preferred loyalty to their suppliers.
Recommendation
In order for the new business to be successful in the Australian Fashion industry, it should consider operating according to these recommendations. As a new firm Ku-De-Ta needs to have a well-differentiated brand for its products in order to establish its competitive base. The new business also needs to establish a strong relationship with its buyers in order to establish a firm customer base. The firm also needs to establish a working relationship with the suppliers in the industry in order to lower its operation costs.
According to the research, the Fashion industry has strong barriers to new entrants and therefore the new industry needs to have all the necessary requirements before venturing into the new industry. The new business also needs to consider an exit strategy in a situation where the new business does not materialize.
Hofstede's cultural dimensions
The power of distance is the first important factor for the company to consider when hiring its employees. The French culture promotes high power of distance since its society values the distance between the superiors and subordinates in an organization (Smith and Bond, 1993 pp. 122). On the other hand, the Australian society supports equality among all workers in an organization regardless of the role they play. The research also found that the French society is conservative as compared to the Australian society in terms of age differences. In French culture decisions are made by people from the older generation compared to the decisions made by younger generations. On the other hand, Australian society advocated for independence of thoughts across the different structures of its population. The new business therefore needed to consider this factor in order to excel in the market.
Understanding the cultural background of people in a certain country is an important tool that is applied to establish marketing strategies. According to Cutler and Javalgi (1992), the culture of the people in a certain society is very important since it determines the strategies that business needs to apply when marketing their products. From this statement, the proposed firm needs to consider the different cultures of the proposed French and Australian employees according to Hofstede's cultural dimensions.
The next important dimension that was found to be a major determinant between the French and Australian society is individualism. The analysis proved that the Australian society has a high level of individualism while the French society has medium level of individualism (Rokeach, 1973 pp. 34). The high scores of individualism in the Australian society indicate that, the society level of integration is above that of France. The French society had a culture that valued and promoted capitalism and therefore the proposed company needed to consider the different types of employees and their suitability for the different posts. The analysis also established that the French people preferred integration less than the Australian society. From the research findings, both the French and Australian society will work better as individual and therefore Kudeta should consider having more individual positions.
The third important dimension in the two societies is the power of uncertainty or uncertainty avoidance. Uncertainty avoidance is the degree of how people avoid uncertain situations and this determines their ability to take risks (Triandis, 1995). The analysis established that the Australian society is highly optimistic compared to the French society. The research also found that the French society preferred working under formal rules in order to avoid uncertainty.
The research also found that both the Australian and French society have low score on long-term orientations and therefore they will not consider involvement in long-term ventures.
A masculine society is a society that is characterized by success and competition while a feminine society is concerned more with quality of life and care for other people's welfare. From the research, the Australian society has a high score of masculinity as compared to the French society. In particular, Australia has a score of 61 in masculinity while France has a score of 43 in masculinity (Hofstede, web).
References
Cutler, Bob, and Javalgi, Allan. 1992. Cross-cultural analysis of the visual components of print advertising: The United States and the European Community. Journal of Advertising Research, 32, 71-80.
Greiner, Larry. 1972. Evolution and revolution as organizations grow. Harvard Business Review. July-August, 37-47.
Hofstede, Geert. 2001. Culture's consequences: International differences in work-related values. Newbury Park, CA: Sage.
Kerr, Steven. 2004. Introduction: Preparing people to lead. Academy of Management Executive. 18(2), 118-120.
Rokeach, Milton. 1973. The nature of human values. New York: Free Press.
Smith, Michael, and Bond, Harris. 1993. Social psychology across cultures: Analysis and perspectives. London: Harvester Wheatsheaf.
Smither, James and Reilly, Richard. 2005. Does performance improve following multisource feedback? Personnel Psychology 58: 33-66.
Shaw, James. 1990. A cognitive categorization model for the study of intercultural management. Academy of Management Review, 15(4), 626-645.
Triandis, H. 1995. Individualism and Collectivism. Boulder, CO: Westview Press.
Hofstede, Geert. About France. Retrieved from: < http://geert-hofstede.com/australia.html>