Question

In 350 words, Outline Porter's five forces model of industry competition. How are the various barriers to entry relevant to global marketing?

Answer 1

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The five forces according to Porter that determine industry Competition are as follows:-

1. Competitive rivalry
This tells us about the current level or forces of the competition in the industry right now.

2. Bargaining power of the supplier
This tells us about the power or the potential that a supplier can utilize to allow them to increase their prices, lowering the profitability element in a business.

3. Bargaining power of the customer
This tells us about the power that a customer possess that allows them in a situation to demand a better price for any goods or services that any business provides.

4. The threat of new entrants
This tells us about the increase of potential rival in the market due to the inclusion or entry of another company, product or service which increases the element of competition.

5. The threat of substitute product or services
This tells us about the presence of services or a product which is identical or partly similar to our current product, potentially changing the landscape of competition from within the market.

The inclusion of information systems into the structure of the industry provides a company with a strategic and productive environment. This is possible due to the inclusion of data analytics and forecasting capabilities and the collection and maintenance of a large amount of data and accounts and also utilizing the cloud-based platform which provides a company strategic control over their current position in the market, evaluate and determine market trends and allow a company to act according to hard facts and current, past and potential market trends. All this gives a company a strategic advantage over its competition.

The various barriers to entry are relevant to global marketing as Doing business in one’s own country or local area is a different ball game altogether. The local laws are different and the local policies and import and export law are different. The tax exemptions and brackets are different and based upon the growth in a company, expansion is a viable option. But, due to the trade laws and taxes in some countries, the current business model that the company follows changes, or has to change accordingly to incorporate the changes that occur in the structure of the functions of the company. Entering a new market has its own challenges along with benefits.

Different market entry strategies that businesses utilize to break into the international market are:-

Exporting: a business usually utilize this mode as this is the safest mode of entry into the foreign market which is relatively risk-free, this mode allows a firm to either ship their own products themselves into the foreign market or uses third-party logistics to allow them to create a name for themselves in the market. The risk associated with this strategy include the barriers in a country present due to the different tax laws and import restrictions and also procuring efficiency with their logistics, investing in which could potentially fail if the exchange rate fluctuates.

Licensing: a business usually utilizes this model in the hope of being able to break into a foreign market, usually providing another company with a part of their brand value and product supply chain and experience and in turn allow them to earn loyalty on per product basis when the product is actually sold in the market. This is also a relatively easier mode of entry into the market and provides a company to manage their risks and finances more efficiently allowing them the exposure into the new market without having to leverage their resources or risk their brand name in the process. The risk associated with this strategy potentially include their brand reputation being tarnished and the creation of competition in their market.

Franchising: a franchise can be partnered with that will allow a company to break into a foreign market leveraging the name, brand and market position of another competitor and therefore, they are able to leverage an already established business that has established channel and connection and is already operating in the market and allow them to leverage their name and enter the market without much planning and creating efficient channels. This mode of entry is a little riskier than the other two modes of entry but allows a company to easily enter another market without much planning and corporate restructuring and allows a company to build their own brand and understand the market in the process. Franchising can sometimes create a distrust in the market due to the inefficiency of the system and royalty that needs to be paid can be high.

Financial management especially overseas can be a challenging task. Not only does it require a change in the working operation of a company, it requires interrelations with other managing firms which would require the company to be well informed about the laws of business and partnership and management by other firms and their knowledge of criminal and judiciary laws that a country follows.

A firm/ company needs to evaluate the structure of their organization which is needed to successfully execute the strategy to implement changes in the infrastructure.
Policies need to be developed that would take into account the requirements of the local policies and procedures and that needs to be done to ensure that there is a harmony between a company’s existing structural policies and changes that are brought about by the inclusion of the new rules which need to be created to allow the company to function in any foreign economy. Following such changes, a company can monetize their gain and maximize their financial gains and stock prices