Business Strategy

Business Strategy 751

Lasell University

Shiv Kapur

03/01/20

The Future And How To Survive It

The Five Forces That Shape Strategy

Rivalry among

existing

competitors

According to the article, multinational companies in both Europe and North America

are being faced by threats from surprisingly familiar competitors, especially those

they have always been aware of. However, these existing competitors have their foot

in some form of technology, and can even be relatively smaller enterprises which

have begun venturing into technology. The advantages that these multinational

companies used to enjoy, including scale, a global presence as well as falling costs,

are no longer sufficient to match the combined competitive efforts from both existing

firms as well as upcoming ones.

Threat of new

entrants

While the existing competitors already have their foot in technology, the even greater

threat to existing multinationals lies in the technology sector. The revenue generated

from this sector has increased by as much as 10 times in thirty years and this is a trend

that is proving severely difficult for existing multinational companies to keep up with

or even hope to match. While they are being faced by problems attributed to an aging

workforce or even increasing tax rates, they are being phased out by incoming

companies which are playing the longer game, even if it means not generating as

much profit. This comes from such companies prioritizing market share and scale

even if money is lost over a significant period. This way, they are able to focus most

of their attention on creating a strong foothold for themselves.

Bargaining power

of supplies

The tech industry is able to leverage some facilities that are unavailable to

multinational companies. The rapid expansion of tech companies is accompanied by a

relatively low price of storing, transporting and replicating data obtained from its

operations. This allows these companies to ‘add interactions and business lines.’ In

other words, they do not have to waste time battling with problems that are faced by

other companies when it comes to making new connections because they have more

than enough time for that.

Bargaining power

of buyers

Consumers are usually attracted to those companies that offer quality services for less

money. The demand for low prices, increased variety and general convenience is

always increasing since customers are insatiable, i.e. they will always demand better

even if the best is provided to them at their fingertips. Tech companies usually

provided existing services at a cheaper price, since technology has made it easier for

them to avail these commodities to their customers. The intermediaries that are being

replaced end up losing money or even shutting down when customers no longer want

to engage in business with them. Multinational companies require large capital

investments which is mainly obtained from profits made and if there are no profits,

then the entire enterprise faces bankruptcy.

Threat of

substitute

products or

services

According to the article, ‘incumbents are often caught flat-footed when tech firms

move into markets where nobody expects them’. Various companies around the world

have begun being struck by cheaper and more available alternatives to the products or

services that they offer. Consumers will always be drawn to what is affordable for

them and they end up being the big winners while the companies suffer replacement

and even bankruptcy. The communication industry, for example, is overrun with ideas

brought forth by technological development. Even the existing forms still face the

threat of being replaced by superior versions of themselves and those companies

unable to keep up with the trend have been observed to register declining profit

margins and even being driven out of business.

References

- Dobbs R., Koller T., & Ramaswamy S. (2015). The future and how to survive

it. Harvard Business Review

- Porter, M. E. The five competitive forces that shape strategy. Harvard business

review