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City Or Area
Theni
State
Tamil Nadu
Pincode
625531
Mobile
+91 9976260177
Landmark
Periyakulam Road
Company Profile
Balasanka group commenced a small scale Dried Seed Husk, Tamarind Pulp Processing
Department in 1966 by its founder Mr. S. Thirupathi Nadar. At present, Balasanka group of firms
has been steadfast in its commitment to its employees and its customers in its line of business.
Taken in the aggregate, encompassing all firms, annual turnover reaches 100 Crores. The
company has progressed from a miniature trading firm to full-fledged and progressive
manufacturing organization, serving the industrial application need of varied sectors.
Implementing the maxim of Watts Humprey "Innovation is the process of turning ideas into
manufacturable and marketable form" into our manufacturing operation.
Sri Balasanka Mill is the flagship concern of Balasanka Groups, has been founded in the year
2001 according with high quality control policy and off and on improvising production
technology, that enables us to prepare fine variety of tamarind pulp that is optimum in quality.
Satisfying the need of different industries and sectors with indomitable commitment to obtaining
maximum level of client's satisfaction through product excellence and high business ethics.
Balasanka group of firms is wide spread and present in various diversified sectors :
Shri Murugesan TVS - Authorised main dealers for TVS two wheelers
In its every domain of business Balasanka group is intended to implement its innovative systems
and maintain the optimal standards in order to notch up the business excellence and the highest
extent of customer's contentment!
Name of Managing Director
Year of Establishment
2001
Nature of Business
Market Covered
Worldwide
Porter five forces analysis is a framework to analyze the level of competition within an industry
and business strategy development. It draws upon industrial organization (IO) economics to derive
five forces that determine the competitive intensity and therefore attractiveness of an Industry.
Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is
one in which the combination of these five forces acts to drive down overall profitability. A very
unattractive industry would be one approaching "pure competition", in which available profits for all
firms are driven to normal profit. This analysis is associated with its principal innovator Michael E.
Porterof Harvard University.
Porter referred to these forces as the micro environment, to contrast it with the more general
term macro environment. They consist of those forces close to a company that affect its ability to
serve its customers and make a profit. A change in any of the forces normally requires a business
unit to re-assess the marketplace given the overall change inindustry information. The overall
industry attractiveness does not imply that every firm in the industry will return the same profitability.
Firms are able to apply their core competencies, business model or network to achieve a profit
above the industry average. A clear example of this is the airline industry. As an industry, profitability
is low and yet individual companies, by applying unique business models, have been able to make a
return in excess of the industry average.
Porter's five forces include - three forces from 'horizontal' competition: the threat of substitute
products or services, the threat of established rivals, and the threat of new entrants; and two forces
from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.
Porter developed his Five Forces analysis in reaction to the then-popular SWOT analysis, which he
found unrigorous and ad hoc.[1] Porter's five forces is based on the Structure-Conduct-Performance
paradigm in industrial organizational economics. It has been applied to a diverse range of problems,
from helping businesses become more profitable to helping governments stabilize industries. [2] Other
Porter strategic frameworks include the value chain and the generic strategies.
The existence of barriers to entry (patents, rights, etc.). The most attractive segment is one
in which entry barriers are high and exit barriers are low. Few new firms can enter and nonperforming firms can exit easily.
Government policy
Capital requirements
Absolute cost
Economies of scale
Product differentiation
Brand equity
Expected retaliation
Access to distribution
Industry profitability (the more profitable the industry the more attractive it will be to new
competitors)
Ease of substitution
Substandard product
Quality depreciation
Supplier competition: the ability to forward vertically integrate and cut out the buyer.
Degree of transparency
Introduction
There is continuing interest in the study of the forces that impact on an organisation, particularly
those that can be harnessed to provide competitive advantage. The ideas and models which
emerged during the period from 1979 to the mid-1980s (Porter, 1998) were based on the idea that
competitive advantage came from the ability to earn a return on investment that was better than
the average for the industry sector (Thurlby, 1998).
As Porter's 5 Forces analysis deals with factors outside an industry that influence the nature of
competition within it, the forces inside the industry (microenvironment) that influence the way in
which firms compete, and so the industrys likely profitability is conducted in Porters five forces
model. A business has to understand the dynamics of its industries and markets in order to
compete effectively in the marketplace. Porter (1980a) defined the forces which drive
competition, contending that the competitive environment is created by the interaction of five
different forces acting on a business. In addition to rivalry among existing firms and the threat of
new entrants into the market, there are also the forces of supplier power, the power of the buyers,
and the threat of substitute products or services. Porter suggested that the intensity of
competition is determined by the relative strengths of these forces.
Product-for-product substitution (email for mail, fax); is based on the substitution of need;
Generic substitution (Video suppliers compete with travel companies);
Substitution that relates to something that people can do without (cigarettes, alcohol).
Force 4: Buyer Power
Buyer power is one of the two horizontal forces that influence the appropriation of the value
created by an industry (refer to the diagram). The most important determinants of buyer power
are the size and the concentration of customers. Other factors are the extent to which the buyers
are informed and the concentration or differentiation of the competitors. Kippenberger (1998)
states that it is often useful to distinguish potential buyer power from the buyer's willingness or
incentive to use that power, willingness that derives mainly from the risk of failure associated
with a product's use.
This force is relatively high where there a few, large players in the market, as it is the case with
retailers an grocery stores;
Present where there is a large number of undifferentiated, small suppliers, such as small farming
businesses supplying large grocery companies;
Low cost of switching between suppliers, such as from one fleet supplier of trucks to another.
Force 5: Supplier Power
Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier power
typically focuses first on the relative size and concentration of suppliers relative to industry
participants and second on the degree of differentiation in the inputs supplied. The ability to
charge customers different prices in line with differences in the value created for each of those
buyers usually indicates that the market is characterized by high supplier power and at the same
time by low buyer power (Porter, 1998). Bargaining power of suppliers exists in the following
situations:
Where the switching costs are high (switching from one Internet provider to another);
High power of brands (McDonalds, British Airways, Tesco);
Possibility of forward integration of suppliers (Brewers buying bars);
Fragmentation of customers (not in clusters) with a limited bargaining power (Gas/Petrol stations
in remote places).
The nature of competition in an industry is strongly affected by the suggested five forces. The
stronger the power of buyers and suppliers, and the stronger the threats of entry and substitution,
the more intense competition is likely to be within the industry. However, these five factors are
not the only ones that determine how firms in an industry will compete the structure of the
industry itself may play an important role. Indeed, the whole five-forces framework is based on
an economic theory know as the Structure-Conduct-Performance (SCP) model: the structure of
an industry determines organizations competitive behaviour (conduct), which in turn determines
their profitability (performance). In concentrated industries, according to this model,
organizations would be expected to compete less fiercely, and make higher profits, than in
fragmented ones. However, as Haberberg and Rieple (2001) state, the histories and cultures of
the firms in the industry also play a very important role in shaping competitive behaviour, and
the predictions of the SCP model need to be modified accordingly.
With a clear understanding of where power lies, it will enable a company to take fair advantage
of its strengths, improve weaknesses, and avoid taking wrong steps. Therefore, to apply this
planning tool effectively, it is important to understand the situation and to look at each of the
forces individually.
In conducting an analysis of Porters Five Forces, it is required to brainstorm all relevant factors
for the companys market situation, and then check against the factors presented for each force in
the diagram above. The next step is to highlight the key factors on a diagram, and summarize the
size and the scale of the force on the diagram. It is suggested to use relevant signs, for instance,
+ and -" to represent the forces moderately in companys favour, or for a force strongly
against.
After identifying favourable and unfavourable forces for the companys performance and
industrys attractiveness, it is important to analyse the situation and examine the impacts of the
forces. One of the critical comments made of the Five Forces framework is its static nature,
whereas the competitive environment is changing turbulently. Are the five forces able to foresee
industry expansion? Is it the corporate strategist's goal to find a position in the industry where his
or her company can best defend itself against these forces or can influence them in its favour, or
is the goal to become part of the ongoing commerce with the intention to produce innovative
ideas that will expand the size of the industry? Is it true that the environment poses a threat to the
organisation, leading to the consideration of suppliers and buyers as threats that need to be
tackled, or does it offer the ground for a constitutive industry player co-operation?
By thinking through how each force affects a company, and by identifying the strength and
direction of each force, it provides an opportunity to identify the strength of the position and the
ability to make a sustained profit in the industry (Mind Tools, 2006).
Porter argues that five forces determine the profitability of an industry. At the heart of industry
are rivals and their competitive strategies linked to, for example, pricing or advertising; but, he
contends, it is important to look beyond ones immediate competitors as there are other
determinates of profitability. Specifically, there might be competition from substitute products or
services. These alternatives may be perceived as substitutes by buyers even though they are part
of a different industry. An example would be plastic bottles, glass bottles, and cans for packaging
soft drinks. There may also be the potential threat of new entrants, although some competitors
will see this as an opportunity to strengthen their position in the market by ensuring, as far as
they can, customer loyalty. Finally, it is important to appreciate that companies purchase from
suppliers and sell to buyers. If they are powerful they are in a position to bargain profits away
through reduced margins, by forcing either cost increases or price decreases. This relates to the
strategic option of vertical integration, when the company acquires, or merges with, a supplier or
customer and thereby gains greater control over the chain of activities which leads from basic
materials through to final consumption (Luffman and et al., 1996; Wheelen and Hunger, 1998).
It is important to be aware that this model has further limitations in today's market environment;
as it assumes relatively static market structures. Based originally on the economic situation in the
eighties with its strong competition and relatively stable market structures, it is not able to take
into account new business models and the dynamism of the industries, such as technological
innovations and dynamic market entrants from start-ups that will completely change business
models within short times. For instance, the computer and software industry is often considered
as being highly competitive. The industry structure is constantly being revolutionized by
innovation that indicates Five Forces model being of limited value since it represents no more
than snapshots of a moving picture. Therefore, it is not advisable to develop a strategy solely on
the basis of Porters models (Kippenberger, 1998; Haberberg and Rieple, 2001), but to examine it
in addition to other strategic frameworks of SWOT and PEST analysis.
Nevertheless, that does not mean that Porters theories became invalid. What needs to be done is
to adopt the model with the knowledge of its limitations and to use it as part of a larger
framework of management tools, techniques and theories. This approach, however, is advisable
for the application of every business model (Recklies, 2001).
Porter's Six Forces model and its relationship to the standard Five Forces model
Porters Five Forces model actually has an extension referred to as Porters Six Forces model. It
is considerably less popular than the Five Forces model as its acceptance has been less positive
than the Five Forces model. The Six Forces model though is very similar to the Five Forces
model with the only difference being the addition of the sixth force in the framework. This sixth
force in the model is termed as the relative power of other stakeholders, and can refer to a
number of other groups or entities, depending on the factor which has the greatest influence
including:
Complementors One school of thought looks at the sixth force to be complementors, which
are businesses offering complementary products to the sector in focus and being analysed (Grove
1996). The author states that these complementary businesses, as a sixth factor, affect the
industry as changes in these businesses (such as new techniques, approaches or technologies) can
impact on the dynamics between the industry and the complementors.
The government The sixth force in the framework can also be considered to be the
government, and is included in the framework if it has potential to impact on all the other five
forces (Gordon, 1997). Thus, the government can have direct impact on the industry as the sixth
force, but can also have indirect impact or influence by affecting the other five forces, whether
favourably or unfavourably.
The public Yet other viewpoints look at the public as the sixth force in the model, particularly
if the public has a strong influence in the dynamics of the sector resulting in changes to the other
forces or in the sector as a whole.
Shareholders This group can also be considered potentially as the sixth force. This is more
important in recent years where shareholder activity has increased significantly in the
boardroom, and management of firms has been scrutinised much more and even given threats if
certain actions favoured by the shareholders were not pursued.
Employees Employees could also be considered as the sixth force if they wielded
extraordinarily strong influence on the firm in a particular sector. The status of employees seems
to follow similar rules in certain sectors, and thus could be considered a strong influence in these
sectors. For example, in the automobile sector in the US, a large part of the work force are
unionised, and thus could be considered the sixth force instead of the government or
complementors.
While a sixth force has been added to Porters original Five Forces model, the acceptance of this
framework has been somewhat limited. This could be for two reasons. First, is that there is no
definite and specific sixth force in all sectors, as it is different for each sector. Second, while a
sixth force could be defined for all sectors, the influence of this factor can also be captured in the
other five forces and thus the necessity of having it in the framework is less compelling.
example, the level of competitor information required is very detailed and may not always be
available.
Conclusion
Any company must seek to understand the nature of its competitive environment if it is to be
successful in achieving its objectives and in establishing appropriate strategies. If a company
fully understands the nature of the Porters five forces, and particularly appreciates which one is
the most important, it will be in a stronger position to defend itself against any threats and to
influence the forces with its strategy. The situation is fluid, and the nature and relative power of
the forces will change. Consequently, the need to monitor and stay aware is continuous.
Some issues during the implementation of these Five Forces are crucially important for
organizations to build long-term business strategy and sustaining competitive advantages rather
than simply list the forces. Successful use of the Porter Model Analysis includes identifying the
sources of competition, the strength and likelihood of that competition existing, and strategic
recommendations for the action a company should take in order to develop barriers to
competition.
If you found this article useful please have a look at the other articles we have written: Ansoff
analysis, McKinsey 7S Framework, SWOT analysis, BCG Growth-Share Matrix, Porter's
Generic Strategies, Scenario Planning, Value chain analysis, Pest Analysis, Balanced Scorecard,
Competitor Analysis, Critical Success Factors, Industry Lifecycle, Marketing Mix and Product
Life Cycle.
References
Haberberg, A. and Rieple, A. (2001) The Strategic Management of Organizations, Essex:
Pearson Education Limited.
Kippenberger, T. (1998) Strategy according to Michael Porter, The Antidote, Vol. 3 Issue 6, pp.
24-25.
Luffman, G., Lea, E., Sanderson, S. and Kenny, B. (1996) Strategic Management, Oxford:
Blackwell Publishers Inc.
Porter, M. (1980a) How Competition Forces Shape Strategy, Harvard Business Review,
September-October, pp.137-145.
Porter, M. (1998) Competitive Strategy: Techniques for Analyzing Industries and Competitors,
New York: Free Press.
Sanderson, S. (1998) New approaches to strategy: new ways of thinking for the millennium,
Management Decision, Vol. 36 issue 1, pp.9-13.
Thurlby B (1998) Competitive forces are also subject to change, Management Decision
London
Wheelen, T. and Hunger, J. (1998) Strategic Management and Business Policy, 6th ed., Reading:
Addison-Wesley.
Bibliography
Baker, M. (1992) Marketing Strategy and Management, London: Macmillan.
Ghemawat, P., Collis, D., Pisano, G. and Rivkin, J. (2001) Strategy and the Business Landscape:
Core Concepts, Upper Saddle River: Pearson Education.
Gordon, P. J. 1997. Ten strategic audit questions. Business Horizons. [online]. 40 (5). Available
from: http://www.factiva.com. [cited 9 December 2007].
Grove, A. 1996. Paradigms of paranoia every company will be confronted by external crises that
revolutionise the rules of its business. How can CEOs identify these exigencies before it is too
late? Business Today. [online]. [Published 22 November 1996]. Available from:
http://www.factiva.com. [cited 9 December 2007].
Porter, M. (1979) How competitive forces shape strategy, Harvard Business Review, Vol. 57
Issue 2, pp.5-8.
Threats: elements in the environment that could cause trouble for the business or
project.
Identification of SWOTs is important because they can inform later steps in planning to achieve
the objective.
First, the decision makers should consider whether the objective is attainable, given the SWOTs.
If the objective is not attainable a different objective must be selected and the process repeated.
Users of SWOT analysis need to ask and answer questions that generate meaningful
information for each category (strengths, weaknesses, opportunities, and threats) to make the
analysis useful and find their competitive advantage.