Unit 32-LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a given market sector-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Porter’s Five Forces model is a tool that evaluates the competitive forces in an industry. It does so by examining five factors:

• supplier power
• buyer power
• the threat of substitutes
• the threat of new entrants
• degree of rivalry.

This article will share insights on how to apply Porter’s Five Forces Model to help evaluate and better understand your market sector.

The first step in applying this tool is understanding its strengths and weaknesses as it can only offer limited information about the industry because it doesn’t provide any insight into pricing strategies or marketing tactics for example. It should be used in conjunction with other tools like SWOT analysis or break-even analysis which may provide more detail on specific strategic choices for business success.

The next step is to put the model to use for making better decisions, and trying to make your competitive advantage as strong as possible.

Analytical tools and models of analysis:

The Balanced Scorecard to align organization vision and strategy

The Balanced Scorecard is a management tool to align organizational vision and strategy. It assures constituencies in an organization understand the broader objectives of the company, what success looks like, and key business drivers. The Balanced Scorecard provides insight into where current operational best practices are coming along well but also identifies opportunities for improvement.

A Balanced Scorecard can track metrics that change from year to year depending on changing legislation, new technology releases, or other external factors outside of your organization’s control.

It makes it easier to monitor progress and identify areas for improvement while executing operations within defined parameters required by ever-changing management requirements such as competitive environment, regulations, or supplier reliability levels.

Competitive analysis using Porter’s Five Forces model

Competitive analysis using Porter’s Five Forces model is a competitive framework that determines industry attractiveness.  The five forces are generally considered the most important factors affecting the level of competition in an industry.

It serves as a decision-making tool for discovering competitive advantages and selecting the appropriate business strategy.

Stakeholder analysis

Stakeholder analysis is a method of assessing who has an interest and how they will be impacted by your organization’s decisions. This process involves defining the interests that are at stake, analyzing what is important to stakeholders, understanding their needs and preferences, and evaluating their power relative to each other.

Stakeholders can range from individuals or groups with specific needs (i.e., customers) to those with greater authority over decision-making processes (i.e., government officials).

Applying the Ansoff matrix to product/market strategy

Applying the “Ansoff Matrix” to product/market strategy is a common marketing tactic. The strategy looks at four basic product strategies:

Tactical (short-term) – focus on improving current products and upgrading them with modifications.

Supplementary (short-term) – produce new products that support the company’s current portfolio, but don’t replace anything.

Market penetration (medium-term) – focus on increasing sales volume through additions to production capacity or intensified advertising campaigns for old products even without any significant changes in what they offer or how they are sold. Developments stay tactical.

Differentiate and grow (long term) – first make sure there is “something different.” Focus on wooing new customers, then make it hard for them to go elsewhere. Analyze your current portfolio of products then grade the opportunities relative to each category by asking “What can I do with this?”

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