This page contains a Flash digital edition of a book.
AND FINALLY...


LAST STAND ❝


A V IEW OF THE WORLD FROM THOSE IN THE KNOW


Darryl Howes encourages us to use Michael Porter’s Five Forces model so we can better understand power in our organisations


I


n line with TJ’s mission statement of “providing the L&D practitioner with


the knowledge, tools and inspiration they need to produce bottom line results for their organisations”, there is merit in seeing how we can better understand our businesses. It could be said that the


basic principles of commerce are well established: turnover for vanity, profit for sanity, cash for reality and all that. But the exception usually proves the rule, so what about a tried and tested technique that can assist us in our own commercial context? Professor Michael Porter is a


Harvard Business School stalwart, an author of 18 books and a six-time winner of the McKinsey Award for the best Harvard Business Review article of the year. His Porter’s Five Forces model1


allows us to investigate both


the internal and external environment within a business through examination of relative power. Te five areas are:


Competitive rivalry


How many competitors does the business have and what are their relative strengths? We could consider current market share, but it might be equally valid to review future potential – look at fast-growth companies such as Uber.


Supplier power


If supplier power is strong, we will have


34 | SEPTEMBER 2017 |


limited opportunity to switch to an alternative, making us vulnerable to service interruption or price increases. Conversely, if it is weak, we may have our pick and be able to play one supplier off against another to improve pricing, or other trade terms such as delivery, payment and so on.


Buyer power


Strong buyer power means we are vulnerable to customers haggling with us to improve their terms to our disadvantage. How ‘sticky’ are our buyers? Could they easily take their custom elsewhere, leaving us high and dry? Tis is an argument for a diversified portfolio of customers to benefit from the swings and roundabouts of different sectors – when one is down, the other is up. On the other hand, a single large and dominant customer could have us trading on a knife edge. No one likes to have all their eggs in one basket.


Threat of substitutes


Tis is an interesting power dynamic. And particularly so in the age of the internet and market disruption. We are asking ourselves the question, can our customers find a dif- ferent way of meeting their needs? And if they could, how easily and cheaply could they do this?


Barriers to entry


In line with the comment above


Reference 1 http://hbs.me/2i9bGmu


@TrainingJournal


and congruent picture. Maybe we won’t – which itself raises a different sort of question!


Darryl Howes is MD of Strategic Business Networking. Join the LinkedIn Group at https://www. linkedin.com/groups/8430203


How ‘sticky’ are our buyers? Could they easily take their custom elsewhere, leaving us high and dry?


regarding disruption, this analysis is about barriers to entry to our market and how easily a potential competitor can step in. Perhaps it would be very expensive (think Premier League football clubs) or maybe there are other, non-financial barriers, such as regulation. Our position might also be strengthened by how well our intellectual property is registered and protected. Consider the legal action taken by major brands, such as Nike, to prevent Far Eastern copycat products – not always successfully. Porter’s Five Forces is a great


start to building a picture of how a business operates and the competing pressures it may be under. Go ahead, gently ask a few questions of those in the know. If you can, talk with sales, purchasing, marketing, finance etc and show interest in the daily challenges that people face. Maybe we’ll get a consistent


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36