Porters Force

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GLOBAL STRATEGY AND POLICY- MAN4720: SCHWARTZ

COURSE INFORMATION HANDOUT NUMBER 5 GUIDELINES FOR PORTER’S INDUSTRY TASK ENVIRONMENT ANALYSIS

1. PURPOSE:

• This assignment was created in response to testing requirements meant to ensure that the FAU College of Business satisfies the criteria set out by the State of Florida Public University System, the Southern Association of Colleges and Schools of Business (SACS) and the Association to Advance Collegiate Schools of Business (AACSB). Accreditation from these bodies ensures state funding, student grant eligibility and recognition of the FAU BBA degree by all accredited post-graduate institutions. Because Global Strategy is the BBA capstone course, the majority of students are seniors about to graduate, and, as such, are expected to demonstrate the analytical and critical thinking skills necessary to flouresh in the business world.

• In accordance with the above you are expected to integrate your own thoughts with data and information from thoroughly researched independent sources.

2. GENERAL GUIDELINES 2.1 Submitting the assignment and the due date

• You must e-mail a copy of your paper to the instructor on, or prior to, the due date indicated on the class schedule – appendix A of the syllabus

• You must also post a copy of your paper to Turnitin on, or prior to, the due date

• The instructions for accessing Turnitin are included within the assignment posted on Canvas.

2.2 Grading

• The exercise is worth twelve points out the 100-point course value for the term.

• Papers are due as indicated on the class schedule – appendix A of the syllabus and late submissions may be subject to the following penalties: ➢ 10% if submitted by e-mail three days late ➢ 20% if received one week late ➢ Papers submitted more than a week late or without Turnitin posting may not be graded and receive a 0/12 = F grade.

• Your graded rubric will be e-mailed to you with individual grade component scores and comments.

• This assignment requires significant grading time. Please be patient while waiting for your grade.

• Course information handout number 5.1 is a sample rubric, showing the grading criteria.

2.3 Source notes

• This assignment requires in-text citation as well as an APA or MLA formatted, source note appendix.

• Always correctly attribute sources of any data or information. If you use someone’s ideas, words or phrases, including those in the textbook you must list the sources on the works cited page as well as in text citations such as “quotation marks”, italics, superscript numbers(1) and/or (brackets).

• URLs alone do not suffice. Provide a date, site name, title and author where available.

• Wikipedia, Investopedia and other “wiki” or similar open sites are not peer reviewed and are therefore academically unacceptable.

3. THE ASSIGNMENT: 3.1 Individual Assignment

• The Porter’s paper is an individual written assignment, and you may not give or receive help form another student on this project! See number 5 below about help from your instructor.

• Breach of the above will be treated as plagiarism and subject to the penalties outlined in the syllabus.

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3.2 Analysis

• The industry to be analyzed must correspond to one of the five industry categories shown below. This, however, excludes the industry corresponding to your company group straegic audit. Selecting an industry at random, that is not included, in the table below is likewise not permitted.

PORTER PAPER INDUSTRIES COMPANY EXAMPLES EXCLUSIONS

Leisure-cruise Carnival plc, Royal Caribbean, Norwegian cruise lines Group One

Internet sales Amazon, E-Bay, Priceline, Angi, Alibaba Group Two

Consumer technology Apple Inc, Hewlett Packard, Dell, Samsung Group Three

Automobile manufacturing GM, Toyota, Ford, Nissan, Fiat-Chrysler, BMW, VW Group Four

Chocolate Candy producers Hershey, Nestlé, Cadbury, Ferrero Rocher, Godiva Group Five

• Analyze your industry using Porter’s six forces as presented in the textbook.

• The paper should be structured using each of the six forces as a title. Rate each force as high, medium, or low and explain the reason why you think so. Do not quantify the ratings.

• Use section headings for each of the forces, show the ratings within the headings and justify the rating by integrating textbook terminology and concept. Build on the evidence and support your ratings with industry research.

• Starting at the bottom of page 343, the textbook offers some industry research suggestions.

• Use whichever text bullet points seem relevant for each of the forces.

• Be concise and get to the point. Do not pad or be so brief as to make the work unintelligible.

3.3 Format

• Include a cover page with the name of the industry on which your analysis is based, the date submitted, your name, your Z number (last 4), course name and section number and instructor’s name.

• The length guideline is four to five pages, not including the cover page and the endnotes.

• Use a 12-point font, 1.5-line spaces and a clearly legible typestyle such as Times New Roman, Ariel, or

Century Gothic.

• Proofread your paper. Grammatical and spelling errors may lower your grade.

• Be sure to number the pages.

• This paper does not require an abstract, executive summary or introduction but does call for a brief conclusion, using the ratings you allocated to the six forces to support your reasoning indicating whether or not the industry you selected presents an opportunity for new companies.

4. DEVELOPING YOUR PAPER – THE UNDERLYING CONCEPT 4.1 Michael Porter and the Task Environment

In 1979 Michael Porter, then an assistant professor at Harvard, proposed that we look at the external environment from an industry as well as company (PEST or STEEP) perspective. His Task Environment is now routinely incorporated in strategic audits and has become known as Porter’s Forces. Dr. Porter initially proposed five forces: Power of Buyers (customers), Power of Suppliers, Threat of New Entrants, Threat of Substitute Products and Rivalry (existing competitors). After publication, his thesis was criticized for failing to take account of the numerous other stakeholders and our textbook therefore includes a sixth force, Relative Power of Other Stakeholders. In a 2011 paper published in Harvard Business Review, Porter continued to object to the inclusion of the sixth force, preferring to characterize it as complimentors, a term initially coined by the late Andy Grove, founder of Intel. Porter nevertheless provided us with a method for assessing the impact of these “other stakeholders” in the form of a Stakeholder Priority Matrix (Fig 8-2, p233). Despite attempts that have been made to inject numeric measurements, the elegance of Porter’s method is found in the use of High, Medium and Low to assess the strength of the various forces. Using a grid, such as that in table 4-5 on page 121, multiplying a weight by a rating to provide a weighted score is often prone to considerable error. You should therefore use High, Medium and Low characterization, rather than a numeric scale of the forces, in your Porter paper The concept for each of the forces is well explained in the textbook and you should carefully read from the middle of page 104 to the top of page 108. In 4.2 I will focus on just a few points that sometimes generate confusion and will answer a few frequent questions.

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4.2 Assessing the six forces NOTE THAT PORTER IS AN INDUSTRY NOT A COMPANY ANALYIS

• ower of the Buyer: Consider the buyer as the ultimate consumer. In the automobile manufacturing industry, for example, the buyer is not the dealership which, as a downstream distributor is considered as a complimentors.

• Power of the Supplier: This sometimes becomes complex since various classes of suppliers have very different levels of power. In the case of the cruise industry for example suppliers of food, alcohol, furniture, cleaning supplies, entertainment etc., the cruise companies have significant choice and there is fierce competition among suppliers for their business. On the other hand, when we consider fuel and shipbuilders, the picture is quite different. You are therefore free to explain this and to characterize the power as Medium High or deal with the two categories of suppliers separately.

• Threat of New Entrants: Confusion here stems from the word NEW and you must be careful to distinguish this from Rivalry which is EXISTING competitors. Here you must look at the barriers to entry. High barriers mean a low threat and vice versa. The text bullet points provide a guide to assessment. In the auto industry for example, Chinese cars therefore constitute a threat of new entrants, whereas Japanese autos are existing competitors.

• Threat of Substitute Products: A substitute is a product that performs the same task or provides an equivalent or substitute, but not identical, service. For example, the commercial airline industry defines its product as transportation and high-speed rail already constitutes such a threat in Europe, and Japan and the US may eventually follow suit. Take care not to confuse substitutes with rivalry.

• Rivalry: In this force it is easy to slip into the mode of a company rather than an industry analysis. The number of competing firms within a given industry is particularly important since rivalry in a consolidated industry tends to be higher than it is in one that is fragmented. Young industries, such as consumer technology however, may not present as clear a picture. Rivalry tends to be high in newer sectors such as smart phones as well as in more consolidated segments such as traditional computers.

• Relative Power of Other Stakeholders: This may be tricky because stakeholder power tends to shift rapidly and therefore requires some research, certain constants may be identified. Government regulators, for example, play a very large role in the airline and auto industries and a lesser but still an important one in the cruise and consumer technology industries. Union influence is another important variable. Complimentors such as dealerships in the auto industry, airport services in commercial airlines, travel agents in the cruise industry and retailers in consumer technology as well as delivery services in the on-line sales industry must also be considered.

4.3 CONCLUSION

Conclusion. Provide a short conclusion indicating whether or not the industry you selected presents an opportunity for new companies. Use the ratings that you allocated to the six forces to support your reasoning.

5. HELP

• Can I E-mail questions to you? Absolutely: Since I generally answer my e-mail between 7 and 8 AM you may expect an answer within

24 hours. Please be specific with your questions. Complex or vague questions may require a telephone or an online appointment. I cannot edit complete papers or entire sections by E-mail. Please ask for help well ahead of the due date since I may not be able to honor last minute requests.

• Can I ask you to look over my work before handing it in? Certainly, provided that you are well prepared with specific questions beforehand and have completed a draft of your paper. Questions of a general nature, the answers to which your classmates may also benefit, should be asked during WebEx class sessions.

• Is help also available for other assignments? Yes. If you find the instructions confusing or simply want suggestions for improvement, I will be happy to assist you. For individual guidance on the strategic audit please E-mail for an appointment, have a draft of your work ready ahead of tim, specify the critical case issues, and try to have as many members of your group as possible online to share the advice.

CI05 Porter guide & FAQ 4720 Spring 24