The paper "Overall Business Strategy of Adventure Works Cycle" is a wonderful example of an assignment on business. The construct tends to illuminate the competition level in the industry. In addition, the construct provides for the development of a particular business entity. Besides, the theory’ s main basis is the economics of industrial organization that determines the competition level and the consequent attractiveness in the market. In simpler terms, the model focuses on the micro factors that influence a company’ s profit maximization strategies in the macroeconomic context. The forces include the bargaining power of the potential buyers or consumers, the bargaining power of the inherent suppliers and sellers, the threat that other substitutes pose, and the threat that new business that are entering the market pose.
In addition, the construct presents the ultimate rivalry in the industry that comprises of all the other factors. In another perspective, porter presents factors from two different categories from the competition in the market. The components include horizontal competition as per the competition from substitutes, existing firms, and new entrants. On the other hand, there is vertical competition that emanates from the bargaining power of both the buyers and the suppliers.
The model is in opposition to the SWOT analysis (Porter, January 2008). The bicycle industry just like any other business activity experiences several challenges in its operations. The model correspondingly encompasses the various challenges. New entrants The market experience has the nature of perfect competition, the proceeds in the bicycle industry definitely attract new investors. Due to the fact, the profits tend to approach the zero mark due to high competition. With respect to the adventure works company, the fiscal year has been successful and thus the publication of the returns will attract more investors. Substitute products The bicycle sector in the transport industry experiences various alternates ranging from cars to motorbikes.
In other cases, skateboards also pose as substitutes. Similarly, other companies producing bicycles also produce commodities that are substitutes to the products that Adventure works produce. Customers bargaining power the term refers to the sensitivity of the consumers to diversities in prices thus creating more pressure for the firm. The bicycle industry can be a victim whereby consumers can tend to oppose price increases or compare existing prices with other prices of other commodities. The supplier’ s bargaining power The term is as per the inputs market.
The suppliers of the raw materials, services, as well as labor to the Adventure Works firm, can determine the firm’ s profitability especially when there are few substitutes in the market. The industry’ s rivalry The rivalry in the market is the main determinant of how competitive a particular industry is in a given period. The best strategy to use from the three generic strategies as put forward by porter Focus strategy The strategy is the best, especially for growing firms.
The strategy apprehends specific markets and concentrates on them. Major developments are due to innovation, which is because of specialization. In the case of Adventure Works, the best target population is the sportsmanship population. The firm can focus on the needs of the sportsmen who use bikes and in doing so; more consumers can prefer the bicycles in the long run (Walter, 2010). The differentiation strategy is not optimum for Adventure Works since the method needs a massive initial capital in order for the strategy to create a unique attribute for a particular commodity.
Furthermore, an attribute can take more funds, especially in research and pilot survey to establish relevance in the real market. The strategy of cost leadership is also not suitable for the Adventure Works Company since the company cannot cut off its expenses in order to create an operating advantage in the market. Moreover, the firm is developing and thus the achievement of economies of scale is not possible given the available resources. Tactics to achieve the focus strategy Adventure Works should define its target market and know the requirements of that population.
For example, the population can be cycling athletes in and out of America. Furthermore, the firm should concentrate on a particular racing activity such as road bicycle racing or mountain bike battling. The business should then seek to reach out to the target population by gaining a competitive advantage. The preposition is through either a reduction in prices or the offering of a more differentiated product.
However, the two are possible courtesy of the available resources that the firm owns. Therefore, the Adventure Works business entity should evaluate the prevailing resources in comparison with the needs that the target population places (Maso, 2005).
Maso, B. (2005). The Sweat of the Gods. UK,London: Mousehold Press,pp. 1–2.
Porter, M. E. ( January 2008). The Five Competitive Forces that Shape Strategy. Harvard Business Review, 86-104.
Walter, K. (2010). The Lords of Strategy. London: Harvard Business Press.