Tutorial Preparation Assignment 03

039
Mohamad Aqil
There are a lot of forces that influence a business in an industry. In 1979 M. Porter
created five forces model that shows that acts as analysis tool that interpret this forces
to determine the intensity of competition in an industry and also how well is their
profit.( Ovidijus Jurevicius, 2013) There are two vital situation in that could be
analyse by using this 5 forces which is intense competitive forces and also low
competitive forces. Strong competitive forces are unattractive to the industry as firm
are likely to earn low profit while low competitive firms are consider attractive to
industry as firm will possibly earn high profit.
Porters 5 Forces
1.Threat of entry
-An on going business not only face existing players in the market but also potential
business new business in a market. The forces to entry determine how hard or easy for
a business to get in the specific industry.( Ovidijus Jurevicius, 2013 )If an industry is
producing a lot of profit and could be seen to have a high potential in the long run,
then it will be appealing to new companies. However there are some industry that
have high barriers to which makes it hard for new emerging firm to get a place in the
industry. Examples of the barriers are :
-Pattern of a specific product
-Availability of high technology and infrastructure
- Loyal consumers existing in the current industry
-High capital needed for an industry
2.Bargaining power of suppliers
- Suppliers provide raw materials to firm and they manufacture it into a product. If
there are limited suppliers of specific raw materials, the suppliers will dictate the
situation. This means the suppliers have strong bargaining power and they can sell
high priced or low quality materials to their buyers. This will directly affect a firm in
term of its profit. This situation might also occur when: Suppliers holds a pattern or a
proprietary knowledge and cost of switching to other alternative is high (Ovidijus
Jurevicius, 2013)
3.Bargaining power of buyers
- Buyers play an important role that determines the price of a product in an industry.
The bargaining power is high when buyers have the power to demand low price and
better quality of product that firms produce. (Ovidijus Jurevicius, 2013) This 2
situation will result in lower profit for the firms/producer. The circumstance where the
bargaining power is high is when there is only a few buyers in the market, the product
have many substitutes and buyers are really concern about the price.
4.Threat of substitutes
- Firm or company that created a product is could easily lose their market when
buyers can find a similar product(substitutes) with better price and better quality. For
example coffee and tea.

Tutorial Preparation Assignment 03

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Mohamad Aqil
5.Industry rivalry between competitors
- The competitive force is the major thing that determines the profitability in an
industry. (Ovidijus Jurevicius, 2013) High competitive forces occurs when
producer/firms need to compete vigorously among each other for a market share,
which leads to a low profit. Rivalry is intense when:
~ High number of competitors
~ Growth of the industry is slow or negative
~Easy exit barriers
~Low customers loyalty
~Product are not differentiate and can be easily substituted
Based on this model Porter have come up with 4 competitive strategies that will help
gain competitive advantage:
1.Cost Leadership
- This strategy is by reducing the price of the good that is produced to buyers and
having minimal mark up. (Dani Arbuckle) The idea of this strategy is selling good or
services with the lowest price to be the cheapest provider in the industry. This will
make it difficult for competitors to compete with the company. To get a high profit
and selling low price of good, this strategy require economies of scale. Therefore it is
only suitable for large business.
2.Differentiation
- This strategy is by producing product that is slightly different or unique than other
product in the market. Competitors cant compete with unique product as they cannot
offer what the company is offering making it a huge advantage for the company.
(Dani Arbuckle)
3.Low Cost Focus
- This strategy is similar to cost leadership. The only different is that this strategy
focus on specific market(niche market). The product with low cost is only marketed in
a specific area and not to the entire population. The aim of this strategy is to be the
cheapest producer in the segment.
4. Differentiation Focus
-This type of differentiation is also by producing a unique good or service but only to
a specific subset of a market. (Dani Arbuckle) By narrowing their market segment a
company can focus fully on the product that they are creating for a specific people,
meaning better quality and more suited for them.
Strategies for Malaysian business partner to gain competitive advantage
The first strategy will be cost leadership strategy. The firm need to reduce the price of
the good that are selling to the lowest in the industry. This is only achievable when the

Tutorial Preparation Assignment 03

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Mohamad Aqil
firm takes the lowest possible markup to obtain profit. This will increase the demand
for the product as it sells the lowest price in the industry. Thus this firm will gain this
competitive advantage such as generating more sales and have wider range of
customers market in the industry. The second strategy is differentiation. The business
partner need to advise his firm to produce a product that is unique and slightly
different from other firms. The firm will automatically gain customers, as they are the
only supplier to the unique product. Not only that other firms cant compete with this
company, as they cant offer this type of product. For example this firm invest a
significant amount of money in research and development (RND) to improvise a
product that will satisfy their customers therefor earn a lot of profit.The third strategy
is low cost focus. Firm reducing the price of their product only to just to a particular
segment of the population not all. For instance a restaurant only focus on their
customer in a single town. They must sell food that is cheapest food in the town but
not necessarily the cheapest in the overall market. The forth strategy is differentiation
focus. The business partner should advise the firm to narrow their market specializing
for certain type people. For instance developing a product only for left-handed people.
This will help the company in terms of cost as they can focus on a smaller market
segment that require less raw material making their business more profitable
To sustain this 4 strategy so that other companies do not copy is this firms product is
by protecting the firms intellectual property. Use legal protection available such as
trademark names, logos and slogans, patent invention processes to protect the design
that we had made. (Rachel Bridge 2014) The next way to sustain the firms product is
by checking the product annually in the market. The shape of your product bottle, the
position of your logo, or even the colour of your design need to be consider as
valuable assets which need protecting to prevent other companies to company from
copying it and distributing the same product in the market. (Rachel Bridge 2014) The
final way is keeping the latest product to the firm itself and not releasing all latest
product. This will help the firm stay in the market for a long time.Thus making the 4
strategies above sustainable.
In conclusion, this 4 porter strategies is important to the firm to stay in the market and
dominating the 5 forces that is stated by porter. This strategy will make the company
earn a lot of profit and gain a lot of customers.
1202 Words

Tutorial Preparation Assignment 03

039
Mohamad Aqil
References:
Dani Arbuckle, What Are the Four Major Types of Competitive Strategies?
http://yourbusiness.azcentral.com/f
Rachel Bridge ,2014 How to stop competitors copying your ideas Retrieved from:
The Telegraph
http://www.telegraph.co.uk/
Ovidijus Jurevicius, 2013 Porters Five Forces Retrieved from: Strategic
Management Insight
https://www.strategicmanagementinsight.com/