Five Force Model for Ministries Departments & Agencies (MDA) : Five Force Model for Ministries Departments & Agencies (MDA) Prepared by: Dr. H. Kwame Afaglo (PhD, BSc)
2009
Five Force Model for MDAs : Five Force Model for MDAs The Five Forces model of Porter is an Outside-in business unit strategy tool that is used to make an analysis of the attractiveness (value) of an industry structure. The model was designed for analyzing individual business strategies.
However overtime non-profit making organisations as MDAs have adopting it
Five Force Model for MDAs : Five Force Model for MDAs to:
give legislature a proper insight into the thinking and value chain of private sector organisations.
places legislative arm of governance the chance to promulgate laws and policies that guides and protect profit making establishments that is not detrimental to national interest.
Five Force Model for MDAs : Five Force Model for MDAs arms independent sector regulatory bodies with tools to redress anti-competitive practices in an economy. Say, regulating private institutions that seeks to manipulate sectors on monopolistic lines by acquiring ownership of competitors per acquisitions etc.
Five Force Model for MDAs : Five Force Model for MDAs provides sector based regulatory bodies the knowledge to resolve grievances either between consumer and firm or Business to Business (B22) complaint.
serves as a tool for government to encourage innovation, change and macro-economic growth.
Five Force Model for MDAs : Five Force Model for MDAs provide citizens the choice as to which department or agency would serve his or her course best when approached. E.g. Ombudsman General, Federation of Women Lawyers, Citizen Advisory Office etc, in legal cases. Apparently all the afore-mentioned institutions are legal service
Five Force Model for MDAs : Five Force Model for MDAs providers at no cost to recipients (citizen). In the health sector, its general hospitals, polyclinics, health post, traditional health centres, other health services etc. In these cases the government is the funder, yet their management sometimes employ the Five Forces model to identify a niche market of which they are serving.
Five Force Model for MDAs : Five Force Model for MDAs Having understood some of the usefulness of Michael Porter’s Five Forces model to MDAs, what then is the Five Forces model?
The Competitive Forces analysis is made by the identification of 5 fundamental competitive forces:
Five Force Model for MDAs : Five Force Model for MDAs Entry of competitors- How easy or difficult is it for new entrants to start competing, which barriers do exist.
Threat of substitutes- How easy can a product or service be substituted, especially made cheaper.
Bargaining power of buyers - How strong is the position of buyers. Can they work together in ordering large volumes.
Five Force Model for MDAs : Five Force Model for MDAs 4. Bargaining power of suppliers - How strong is the position of sellers. Do many potential suppliers exist or only few potential suppliers, monopoly?
5. Rivalry among the existing players- Does a strong competition between the existing players exist? Is one player very dominant or are all equal in strength and size.
Five Force Model for MDAs : Five Force Model for MDAs Sometimes a sixth competitive force is added:
6. Government- Porter's Competitive Forces model is probably one of the most often used business strategy tools. It has proven its usefulness on numerous occasions. Porter's model is particularly strong in thinking Outside-in.
Five Force Model for MDAs(Diagram was sourced www.businessballs.com) : Five Force Model for MDAs(Diagram was sourced www.businessballs.com)
Five Force Model for MDAs : Five Force Model for MDAs THREAT OF NEW ENTRANTS DEPENDS ON:
Economies of scale.
Capital / investment requirements.
Customer switching costs.
Access to industry distribution channels.
Access to technology.
Brand loyalty. Are customers loyal?
The likelihood of retaliation from existing industry players.
Government regulations. Can new entrants get subsidies?
Five Force Model for MDAs : Five Force Model for MDAs 2. THREAT OF SUBSTITUTES DEPENDS ON :
Quality. Is a substitute better?
Buyers' willingness to substitute.
The relative price and performance of substitutes.
The costs of switching to substitutes. Is it easy to change to another product?
Five Force Model for MDAs : Five Force Model for MDAs 3. BARGAINING POWER OF SUPPLIERS DEPENDS ON:
Concentration of suppliers. Are there many buyers and few dominant suppliers?
Branding. Is the brand of the supplier strong?
Profitability of suppliers. Are suppliers forced to raise prices?
Suppliers threaten to integrate forward into the industry (for example: brand manufacturers threatening to set up their own retail outlets).
Five Force Model for MDAs : Five Force Model for MDAs Buyers do not threaten to integrate backwards into supply.
Role of quality and service.
The industry is not a key customer group to the suppliers.
Switching costs. Is it easy for suppliers to find new customers?
Five Force Model for MDAs : Five Force Model for MDAs 4. BARGAINING POWER OF BUYERS DEPENDS ON:
Concentration of buyers. Are there a few dominant buyers and many sellers in the industry?
Differentiation. Are products standardized?
Profitability of buyers. Are buyers forced to be tough?
Role of quality and service.
Threat of backward and forward integration into the industry.
Switching costs. Is it easy for buyers to switch their supplier?
Five Force Model for MDAs : Five Force Model for MDAs 5. INTENSITY OF RIVALRY DEPENDS ON:
The structure of competition. Rivalry will be more intense if there are lots of small or equally sized competitors; rivalry will be less if an industry has a clear market leader.
The structure of industry costs. Industries with high fixed costs encourage competitors to manufacture at full capacity by cutting prices if needed.
Degree of product differentiation. Industries where products are commodities (e.g. steel, coal) typically have greater rivalry.
Five Force Model for MDAs : Five Force Model for MDAs Switching costs. Rivalry is reduced when buyers have high switching costs.
Strategic objectives. If competitors pursue aggressive growth strategies, rivalry will be more intense. If competitors are merely "milking" profits in a mature industry, the degree of rivalry is typically low.
Exit barriers. When barriers to leaving an industry are high, competitors tend to exhibit greater rivalry.
Five Force Model for MDAs : Five Force Model for MDAs STRENGTHS OF THE FIVE COMPETITIVE FORCES MODEL.
The model is a strong tool for competitive analysis at industry level. Compare: PEST Analysis.
It provides useful input for performing a SWOT Analysis.
Five Force Model for MDAs : Five Force Model for MDAs Reference
Chapman, A. (2004) Porter’s five forces model Available from http://www.businessballs.com/portersfiveforcesofcompetition.htm [Accessed on 15 July 2009]