There are 2 parts in this assignment
Part 1: The discussion this week is based on two articles from Harvard Business Review: “What Is Strategy?” and “The Five Competitive Forces That Shape Strategy.” These articles and the questions that follow will inform your thought process as you work through the remaining milestones for your final project. How do you see Porter’s five forces affecting your company’s financial strategy for being competitive in the marketplace? How do the same five forces affect your projections and ideas for future business opportunities?(My company is Apple.inc)
Part 2: Respond to at least two of your classmates’ posts. Provide insight to your classmates as to how you see the five forces affecting their strategy and projections
Classmate #1: CVS five Porter’s forces
Porter’s five forces model is used to assess the nature of competition and attractiveness of an industry. CVS operates within the industry of drugstore.
The industry is dominated by a few big players such as Walgreens Boots Alliance (WBA) and CVS Health (CVS). The degree of rivalry is high, with multiple competitors including drug retail chains, supermarkets such as Kroger (KR), and mass merchandisers such as Walmart (WMT) and Costco Wholesale (COST). Since a lot of competitors are present in the market and there are little product differentiation among competitors, the bargaining power of the buyers is relatively high.
. Supplier relationships are important and drugstores including CVS typically have strong, long-term relationships with suppliers. For example, Walgreens Boots Alliance and AmerisourceBergen (ABC) recently entered into a ten-year pharmaceutical distribution agreement under which AmerisourceBergen would supply branded and generic pharmaceutical products to Walgreens in the United States.
While the industry is concentrated, there is still room for smaller players who can compete effectively by opening stores at convenient locations or by selling special merchandise.
Many product substitutes are available with the industry sold in either drug store or grocery stores, so that the customer has a variety of choices.
Walgreens Boots Alliance (WBA) and CVS Health (CVS) largely dominate the US drugstore market. According to July 2015 research by Barclays’ Meredith Adler on drugstores in the United States, together, CVS Health and Walgreens Boots control at least half of the drugstore market share in 70 of the top 100 metropolitan areas.
1- Rivalry among existing firms – High: there are many companies that provide software (Apple and Google included). The differentiation within the industry should be taken in consideration as well, since it is very high and at the same time it is fast paced. The new will become common very quickly. These is a very high technology industry and brand image, as well as industry growth are strong which adds to the fact that Microsoft needs to keep investing on their products and services to keep up with the industry’s existing firms.
2- New Entrants – Low: The investment needed to compete with Microsoft and the other firms in the industry is very high, which makes difficult to new entrants. Microsoft has definitely the “first movers” advantage and facts like distribution channels and strong brand recognition, which are factors in the industry overall and these are barriers to the new entrants.
However, I’ll make a parenthesis to insert the idea that in this industry, we also have to consider the core competencies separately. Microsoft’s core competencies are operating systems, business solutions, gaming, and software. If we think of a new entrant as a new firm able to provide all the same core competencies that Microsoft, Apple or Google, it is very low, because of the high investment needed, as I mentioned above. However, if we split by core competencies, there are a lot of potential to new entrants in the industry. If we think about these start-ups companies that pop-up every day, they can become a big hit, as it has happened with some of the big companies today. So, if we break down a little more into core competencies for example, the threat would not be as low. On the operating system core competency for example, Microsoft has a huge advantage, which makes the threat for new entrants very high and one of the reasons is the high cost of switching the operating system on the buyer’s side – the computer’s manufacturers.
3- Power of Suppliers – Low: Microsoft is a huge company and their suppliers rely on them, depending on Microsoft’s business for its revenue.
4- Power of Buyers – High: The industry is constantly changing and Microsoft has strong competitors. There are not much cost on changing from a Microsoft product to an Apple or vice versa. Buyers have a strong power on it and a good example was the decrease of price of the Xbox to be able to compete with the PlayStation, since the buyers were not buying the Xbox.
However, I have to mention again that if we break this down to Microsoft’s core competencies and analyze the operating system, the power of buyers of are extremely low. Microsoft can be considered a monopoly on this specific sector and the buyers (personal computer’s manufacturers) have zero power and depend on Microsoft’s product to be able to commercialize their product.
5- Substitute products: High: With other strong competitors, it’s is easy to change from one firm to another based on personal preferences or cost-benefit. Apple is the most valuable firm in the world and it has “stolen” many of Microsoft’s users. The industry offers very similar products and services, which at the end the choice will all come down to what the consumer prefers.