Competitive force is a factor influencing organisation’s contest within the industry and market (Business dictionary, 2009) The competitive force from both internally and externally contributes to performance (Liang et al., 2007).
Porter’s Five Forces recognized as the strategic management model and the industry environment factors in the competitive environment. As shown in Figure 3, the centre block depicts the intensity of competition among industry competitors. The external forces of new entrants, bargaining power of consumers and suppliers, and substitutes are shown as the threats acting on the industry.
An industry, selling prices can be forces up with high bargaining power if have lesser suppliers. On the other hand, purchase prices can be the force down with higher provider and bargaining if have more customers. The new entries depend on the level of the existing industry’s difficulties. Rivalry can threat to existing industry as the market shares will decrease and product price will lead to lower profits. Threat of substitute product able to make buying-selling contracts in advanced by comparing they end or selection and approved vendor list in terms of the production competence, price, quality, and delivery ability.
The purpose of developing a model of environmental threats is to aid
managers in evaluating these threats so they can come to be greater success
in growth strategies to neutralize them. This five characteristics of corporate structure can threaten the ability of a company to both preserves or produce above-normal returns.
Risk Management functions adaptable to the Five Forces Model and recognized as additional models which involve replacing intra-industry rivalries and competitive threats with the Internal organization, Industry, Information, Infrastructure and Influences. ???
The external environment is complex, opportunities and threats have to be identified for Industry and competitors which is not controllable and changeable. The internal environment is helpful, strengths and weaknesses have to be identified for Employees and customers which is controllable and changeable.
SWOT allows management to determine where resources want to be allocated to either shore up or scale back attributes to optimize program performance.
Strengths give the business a competitive edge, limitations or deficiencies are Weakness of the business, Opportunities give the chances to improve business performance, and Threats is external factors affecting to hurt a business and should monitor closely.
These analyses are influenced by the firm’s vision, mission and strategic actions. Also assessing the company’s SWOT that exists externally in order to measure the business sustainability.