Question

a. According to the five forces of the Porter's model, the organization of an industry can be analyzed in terms of its structure, conduct and performance. Discuss

b. Is it always true that structure causes the conduct and thus performance of an industry? Is it possible for the reverse causation? Explain

Answer 1

answer..

a.

The model of the Five Competitive Forces was developed by Michael E. Porter. It is used as a tool for studying and analyzing structure of industry from competitive point of view..

Porters model says that firms or corporate should meet threat and opportunities that are reposed by the external environment. most importantly, competitive strategy should be made based on the understanding of industry structures and the way they undergo the change.

According to Porter there are five competitive forces behind the industry and market:

1. Threat of new entrant

2. Bargaining power of customers

3. Bargaining power of suppliers

4. Threat of substitutes

5. Competitive rivalarily within the industry

Profitability of industry depends on these forces and further it also indicates if new firms will enter the market.The objective or aim of corporate strategy should be to change these five competitive forces in a way that suit the position of the organization. Porters model advocates analysis of the five driving forces in an industry. Based on the information available from the Five Forces Analysis, firm can take the decision that how to influence or to use particular conditions prevailing in the industry

Question b:

Performance is a consequence of a well conducted and structured industry. It’s like the fruit of a healthy tree. Therefore, tree needs to be well structured and conducted to yield fruits (performance). The industry needs to have proper structure in place and shall conduct responsibly (corporate governance) to deliver high performance quarter on quarter. It can’t be other way round. Only a well structured and well conducted industry will result in high performance for all stakeholders including the customers, share holders, employees, and society at large.