SCHOOL OF BUSINESSBACHELOR OF SCIENCE (HONS) IN ACCOUNTING & FINANCE MGT 3054 STRATEGIC MANAGEMENT
ASSIGNMENT 1: INDIVIDUAL ASSIGNMENT
The Need for reinforcing ‘Government’ as the Sixth Force Lecturer Name: Ms. Arual Dewi A/P P. Arunachalam
Student Name Student ID Tutorial Group
TABLE OF CONTENTS PAGE ASSIGNMENT 1:
The Need for reinforcing ‘Government’ as the Sixth Force……………….2-9 References……………………………………………………………..………10-12
(2192 words) A strategy has to be implemented in order for a company to sustain and become a profitable organization on a long term basis. Many theorists have come up with innovative ideologies and strategies to help the corporates to generate long term profits. In fact, in 1980, Michael Porter developed the Five Forces Analysis model to identify competitive forces that determines the profitability level and the attractiveness of different industries or markets. Looking at the Five Forces framework, Michael Porter claims that it is an effective competitive strategy which is capable to take an aggressive and protective action in order to create an invulnerable situation against the five forces (Cafferky, 2005). The five competitive forces are as follows; competition from rival sellers, threat from potential new entrants, threat from producers of substitute products, bargaining power of suppliers and buyers/customers. The mixture of forces clarifies an industry’s consistency in becoming more profitable than the rest, hence provides further visions into which resources are required and the necessary strategies to be implemented for success. The strength of the single forces differs from one industry to another and over time, within the same industry. For instance, in the mobile phone industry, the fundamental forces are threat from potential new entrants and the competition from rival sellers. In-depth explanations on the five interactive competitive forces are discussed using a case study of an automotive industry manufacturing automobiles, namely the Proton. Malaysia’s first national car, Proton was founded in 1983 by the formal prime minister, Tun Dr. Mahathir Mohamad with the launch of their very first model, Proton Saga. Narrowing down to the company’s five forces, one of it would be the competition from rival sellers which is also described the intensity of competitive rivalry. Rivalry normally occurs when the competitor (Company B) delivers the same product/services as our firm (Company A). If rivalry among firms in a specific industry is small, the industry is considered to be controlled (Stonehouse & Snowdon, 2007). In Proton’s case, the leading competitor in Malaysian automotive industry is the second national car, Perodua. When Perodua penetrated into the market in 1994 with their newly launched Kancil, Proton cars’ turnover, overall sales and exports began to drop. Proton’s main specialty is its reasonable pricing with smaller engine capacity and better fuel-efficiency (Wad & Govindaraju, 2011). In fact, Perodua Kancil was relatively cheap and economical, which was an obvious alternative for a person’s first car compared to Proton and luxury cars that were available back then. The threat from potential new entrants in an industry is the second major determining factor of industry competition. It is defined as the company’s high interest to create barriers to prevent its competitors to penetrate into the market (Amelia et al., 2009). A firm is free to enter and exit a market, but in order to diminish potential new entrants; a c...