Porter's Five Forces Model

Question 1

The Five-Forces Model is the best-known model from which school of thought?

Answer 1

The Rational School

Question 2

What are the five forces referred to in Porter’s Model?

Answer 2

The threat of entrants
Buyer power
Supplier power
The threat of substitutes 
Rivalry existing between firms

Question 3

Why is it beneficial for organisations to use the Five-Forces Model?

Answer 3

It helps the organisation find a product-market position that allows it to excercise bargaining power over suppliers and customers, whilst excluding new entrants and rivals from stealing its position in the marketplace

Question 4

Applying the Five Forces Model to the Newspaper industry, what are the major threats that can be identified?

Answer 4

The attractiveness of the sector is declining
The threat of new entrants is high, since traditional barriers are falling
Buyer power is increasing due to the fact that they have many substitutes to choose from
The threat of substitutes is the most pressing problem, seen as the internet has seen rise to many different free of charge news sites, in addition to citizen journalism
The rivalry between existing firms is intense

Question 5

What two basic strategic scenerios (that are influenced by Porter’s theories) does Meyer offer to the newspaper industry?

Answer 5

1) “Harvest instead of defend” - a short-term strategy with the goal of maximising current returns. He suggests that newspapers concentrate on the segments where threat of substitution is the slowest, raise prices and cut costs.
2) “Enter the substitute industry” - this is a longer-term approach that accepts that change is occurring. Instead of viewing the substitute (in this case, the internet) as a threat, organisations are encouraged to view it as an opportunity instead. Meyer believes that newspapers can utilise the internet to create online editions and reap competitive advantages from their existing relationships with readers and advertisers