The paper "Using the Porter Five Forces Model" is a perfect example of marketing coursework. It is quite evident that while some people consider the stock market as a technical exercise which involves interpreting charts and other who view it as qualitative processes which largely involves estimating company share value compared to its competitor, it is quite important to assess the possibility of using porters five forces model in explaining why one stock market might take over another. Porter’ s five forces can be used to determine why one stock market can have a competitive advantage over another.
Porter’ s five forces framework is defined as a qualitative tool that is widely used in investment analysis. This tool assists in analyzing a stock market competitive stance within any given industry by widely examining specified industrial conditions. The framework also assists investor to determine who well a corporation such as a stock market is positioned to adapt various changes within the target market. The five porters forces are; bargaining power of customers, the bargaining power of suppliers, threat of increased competition from rivals in the market, the threat of substitute products and services and finally, threat new entrants into the market (Porter, 2008). The five porter forces are aimed at developing tactics for the share stock markets to design strategies that will be able to reduce the chances of the profits from leaking to the other players in the same market.
The adopted strategies are aimed at the neutralization of the powers of the suppliers by the standardization of the company parts to those that are more dynamic among the vendors. The strategies should be able to create and maintain a competitive where the buyers are not able to leave you as the supplier and source for the same or equally valuable product from another supplier source (Porter, 1980). The trader of shares will also be able to have offer quality share products in an environment that is heavily competitive and still maintain a competitive advantage.
The strategies that are to be employed should be able to scare off new entrants from venturing into the market and disrupting its value to the buyers. In addition, the strategies will be able to limit the threats that will be offered by substitutes that would shift the attention of the buyers in the market (Berenson, 2003). Based on the threat of entry, it widely involves an analysis of how easy a new stock market can enter an industry and compete away all the profits earned by an existing stock market.
This can be through economies of scale where a stock market marketing, manufacturing, financial and purchasing tend to take advantage of the low cost of capital. Further, the stock market can engage in hiring more specialized workers compared to an already existing industry.
The threat of entry can also be in the form of product differentiation whereby an industry engages in technologically unique branding of consumer products. Evidently, selling of a uniquely branded differentiated product attracts consumers to buy the product. This, in turn, makes such an industry a legal monopoly so long the product differentiated is not superseded (Keen, 2001). The threat of entry considerably has cost advantages that are independent of size. An industry can have experienced thus having a competitive advantage over its opponents.
Further, this same industry may have greater access to unique assets such as raw mineral deposits thus producing goods that enable to overtake other competitors’ stock market. Cost advantage can be experienced when an industry has its own defined proprietary technology which has favorable supplies widely supported by government subsidies. The threat of entry can explain why one stock market can take over another through great access to distribution channels and government policy. For many customers goods, the supply chain is usually controlled by a various small number of participants in each distinct segment normally includes existing product manufacturers and retailers, this can prevent new errant from presenting their products into the market thus giving an indication of why one stock market can take over another.
Based on government policy, it is evident that within certain industries governments are seen to award preferential right or monopoly to the specific operator which in turn limits or prevents entry of competitors in a given stock market. In most countries, utilities fall into this market giving a reason as to why the stock market may take over another.
In given times, this may happen on accident as opposed to purpose as government regulations especially within stock markets aims at creating the high cost of entry thus giving preferred market take over or domineer market share prices (Berenson, 2003).
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