An analysis of Porter’s Five Point Strategy in this essay, as applied to major players in the modern industrial markets.
Porter identified five major factors that affect the strategy that a company can utilize in the modern day market. This study emulates the five factors with respect to some of the major industries that dominate the market. It explains that strategy employed by any company is dependent on both internal and external variables affecting the organization. The industries selected for the study are–the pharmaceutical industry, the airline industry, the automobile industry, the computer industry and the tire industry.
All industries have a tremendous amount of internal rivalry between the various competitors. Having the expert and tacit knowledge for identifying all the variables is important. (Peter & Donnelly). For example, the pharmaceutical industry has an intense internal rivalry. The increasing reliance on medication to improve the quality and longevity of life is observed in modern society. The pharmaceutical industry spends millions of dollars on research and development. It has been estimated that it cost approximately $500- $800 million US to introduce a new product into the market. (King). Intense rivalry to launch new products first into the market exists in the pharmaceutical industry as it is estimated that any drug generates the highest revenue in the first three years of its market introduction. The pharmaceutical industry has experienced extensive mergers and acquisitions worldwide in the past three decades. Mergers and acquisitions have however, created a number of ‘mega-companies’ with tremendous capabilities and resources. Bigger competitors in the field are now threatening an industry, which in the past had never been subjected to take-over-bids. Examples of takeovers in the past 10 years are Pfizer with Warner-Lambert and Glaxo Wellcome with SmithKline Beecham. Serious price competition and short life cycles of products in the pharmaceutical industry has seriously impacted profits generated. Fewer potential pipeline drugs, stringent clinical trials and testing have increased the rivalry.