9/3 Blog

In class we focused on business strategy. It was very interesting learning about Michael Porter's, from Harvard Business School, Five Forces model. The five forces are degree of rivalry, threat of substitute, barrier of entry, buyer power, and supplier power. In addition to the five forces there is also a Six Forces Model, which is Five Forces model plus Complementary products. Then in the business world there are Blue Ocean and Red Ocean. The red ocean is cut throat every going after each other giving the ocean its hue of red while the unknown Blue Ocean is a vast unknown new market awaiting for discovery.

The Five Forces model interests me the most. Before anyone decides on going into a new business field they should consider this model. The rivalry aspect is about competition. They should research the degree of rivalry, any exit barriers, industry concentration, and industry growth. Next a business should be concern about threat of substitute. A substitute can vary switching cost, buyer inclination to substitute, and price performance tradeoff of substitutes. For any company going into a new market always have a barrier of entry. This barrier attributes can list from absolute cost advantage, proprietary learning curve, access to raw materials/inputs, and Government regulation to name a few. The next two forces are buyer power and supplier power. Both forces include threats of integration with each other. So the business should find a way to make themselves indispensable to the buyer and supplier.