BUSINESS STRATEGY Essay Example | Topics and Well Written Essays - 1000 words

BUSINESS STRATEGY - Essay Example The SWOT analysis indicates how the firm can use these forces for sustainable competitive advantage. The five forces are the entry of competitors, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and rivalry amongst the current players in the field. New entrants have to consider government rules and regulations, although most of the times they enjoy certain benefits like tax holiday for a specified period. The SWOT analysis of these five forces help them to identify the capital investment and the whether the costs would justify the right amount of turnover. Brand extension strategy keeps the marketing costs low and the chances of success are high. Vodafone, the UK based mobile phone company decided to enter the US market, they made a very strategic move. To keep the market penetration cost low, they acquired the US firm AirTouch at an investment of  £112bn. They had studied the bargaining powers of the buyers. Acquisition of an existing firm immediately gave them all the customers without having to make a fresh start. The market penetration period reduces and prevents in the number of competitors in the market. Entry barriers like government licenses are also overcome. While these five forces help in studying the competition, buyers, suppliers and the general market trend, it has limitations. Porter’s five forces model does not indicate whether an industry could be attractive because certain companies are in it. Besides, the environment changes very rapidly and it may not be possible to change the strategy as fast by using the five forces model. Most importantly, by using this model, one may concentrate on an existing market but a new market may have better prospects. The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and