The five competitive forces that shape strategy

Suggested article that i was suggested to read this week was THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY written by Michael E. Porter. Talking about what power lies in a business situation, we can easily know who you are competing with and what you should also consider. It talks about five main elements you need to consider when you wanna run a business. The five forces -- Supplier Power, Buyer Power, Competitive Rivalry, Threat of Substitution, Threat of New Entry -- have been identified which will be faced in any industry.


It is very interesting that direct competition is not the only threat in a industry, it changes my mind about the mean of potential competitor. When i think about competition, i will only think about the companies selling and providing the same products and services instead or others. Because direct competitor is the one who directly affect your source of customers and income. However, now i knew that supplier, buyer, substitution and new entrants can also affect a lot to a company.

Now, if i start a new company, i should study whether new products, services or businesses have a profitable potential or not. Then i can investigate what force is high or low in my industry and figure out method to prevent the price competition and make a maximum profit.

Using my dream company as an example, my company will be an crow-funding company.
Firstly, I need to find out the direct competitor of my company.



Product of Kickstarter










Companies like http://crowdfunding.com/, http://www.kickstarter.com with similar products will be the most challenging existed competitors.
Secondly, the threat of new entry is very high. Because the entrant barrier is very low if you want to set up a internet company. The influx of the new entrant will reduce your market share due to limitation of consumer.
Thirdly, supplier power is very poor in the new industry. Because new backers will exist in the market and the money suppliers are not one but are public. Therefore, the capital source can be sufficient.
Fourthly, buyer power is weak due to supplier meaning buyer. The supplier fund money tot support the project and they enjoy the end product. Even thought there are not buyer, the market can still exist.
Finally, there is nearly no substitution. Because my companies is focusing to specific customer instead of normal, common goods. We create a new product according the customer's wants.

To sum up, five forces will be very useful when i am having market research and am accounting the profitability of my new company.

Models of Management

Last week, i learnt about the purpose of studying models of management. A model means a complex mechanism by identifying the major elements and relationship. There are five different models that can be defined . Firstly, rational goal model is effective in productivity and profit by providing the clear direction leads to productive outcomes. Secondly, internal process model can maintain the stability and continuity of a company by the routinisation. Thirdly, human relations model can lead to commitment, morale and cohesion due to the involvement. Finally, the open system can more effective for the organization's adaptability and external support because continual innovation secures external support.

I am quite interested in the open systems model due to the management method. There is very intense interactions between open systems and its environment. In order to adapt the change of the market, continual innovation need to be achieved to maintain the competitiveness of company. In the market like technology and entertainment, the information flow and new inventions appearance are really quick. Therefore, management of these kind of companies is very important. I think the degree of right of staff is very important to make the organization be successful. Decentralization must be used in the management strategy to ensure staffs have enough space for creation.

If i own a company, i will also implement the open systems model. Because i do think that working environment and assistance from the superior are the main reason leading to the success of a company. If staffs can create the idea with any stress and burden, the quality and efficiency of work can be produced. Imagining that if you are a staff which is allow to do free creation, you will feel happy because you can do what you are interested on with salaries. I don't like my staffs work like a robot, i hope they can think and make their own decision.

Organisational Structures

   This week we were talking about organizational structure, which is a important element within an organisation. Every organisation will arrange their own structure to achieve objectives. There are a lot of basic structures like tall, flat and matrix structures. Different structures have their own advantages and cons. In order to introduce a suitable structure to your own company, the owner need to decide it carefully.

   Even though i don't know much about organisational structure, i believe that a good structure can effectively response to the change of external environment. Because company's decisions are mainly affected by the input. Therefore, a good structure of a company can maintain the stability and coordination. I comment that quick response on local market with effective decisions making can make organization better adapt the new environment. If the power of the organization has been centralized by the headquarter, the decision made to handle the problem will be ineffective or outdated. Penetrating market sense allow organization to get the first-handed advantage.

  However, there are a lot of limitations in the organization structures. If different departments are responsible for respective task, there will be not communication between them. The silo culture will badly affect the innovation and creative of organisations. In order to improve the development of organization, association and coordination with different departments should be involved.

  I have been thinking about a company called 3M which is one of the top 500 companies in the world. I really love the policy of this company, which allow staff to have 15% of their working time for own innovation. Staffs from different departments are willing to share their opinions and idea to each others. The policy of innovation is not only beneficial to staffs but also company. Staffs have a high working incentives and close relationship with others. If some project need to be associated between departments, they can achieve a high cooperative work done by all members of a team.

Here is a link talking about why 3M is so unique comparing with other companies: http://theenergycollective.com/marcgunther/44153/why-3m-unique

  Therefore, I think that a good organisational structure cannot without communication and good power distributions.

Organization and Management

   By examining how organisations operate, how they make decisions, who leads them, what influence they have on society, on ourselves, i have learnt a lot about management and organization. 

   First question is about what organization is. Based on my knowledge, organization is a group of people work together to achieve a goal. However, i discover that organization has their own features that i haven't thought about. There are four elements — people, objective, management, structure — in an organization.

• People
• Meaning organization is made by people
• Objective
• Every organization has something to achieve
• Structure
• Different organizations have different management structure in order to increase the management effectiveness
• Management
• Resource need to be managed, direct and controlled by superior in order to enhance the maximum output.

   Even though organization have their own feature, it is also affected by external environment. For example, feedback and external environment will affect the inputs and the processes of an organization to turn them into output.

   After figuring out the influence of organization, i learnt basic structure of an organization. Organization can be divided into four catalogs which are top, middle management, Operational support, organization support. All of them play their own roles in an organization with overlapping the same tasks between them.

   Management is an separated but related topic, teacher used the research based on Henry Mintzberg to figure out the role of management. He divided it into three parts: interpersonal, informational, decisional.  With other referencing from Henri Fayol, i have a better understanding of managerial activities.

   The main idea of organization start me thinking about organization is indecomposable with management. Because i think of a company ' Valve' which is one of the biggest computing game producer in the world, with the strategy that manager will offer a fixed amount of money for their staff to manage and develop their own products without any monitor. Management started simultaneously, staffs will volunteer and coordinate with others to handle different part of project. In this case, it indicates a fact that organization need management to be operated. No matter it is good or bad management. Product Example of Valve:

Management Style of Valve: http://unnamedharald.hubpages.com/hub/Valve-the-Billion-Dollar-Company-With-No-Managers
   I believe that managers sometime are not necessary to monitor their staffs. Freedom allow staffs to create a epic and excellence creations instead of boring planned products. Creative is something that cannot being controlled and pushed by others, but it is a spontaneous idea which even changes the world. I hope all the organization may allow some space for staffs' creation instead of direct them everything. Human kind have their thinking and feeling otherwise we are just like robots.