Methodology/Modifier Name (Heading 1) - Intel520-F. Khan

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Porter’s Five Forces

Fuad Khan
, Date

(
29

November

2010)

Mercyhurst College, Erie PA

Advanced Analytic Techniques Course


Purpose

The purpose of my paper is to assess the value of Porter's Five Forces
analytical method for

examining competitive market forces and formulating

a
winning
strategy

to counter those
competitive market forces

in
U.S.
Central Command (
USCENTCOM) market space.

The paper
will also examine the effectiveness of Porter’s Five Forces analytical method in a personal test
case.
The analytic
al

question
for the

test

case

is "
Is company TNISO in a position to win
contracts for Open Source Intelligence services focusing o
n the Middle East and South East
Asia with Central Command?



Three evaluation
criteria

used to
assess

the

effectiveness of
Porter’s

Five Forces
analytical
technique are as follows:




Formulation of competitive business strategy:

Formulate
a winning
strategy to
counter market forces in US
CENTCOM market

space
.



Repeatability
:

Can we use

Porter's Five Forces

analytical method
repeatedly under
changing market conditions.



Ease of use:

Is it easy to
create a potential winning business strategy u
s
ing Porte
r's
Five Forces analytical method.


When we measure
Porter's Five Forces analytic method

against the above three evaluation
criteria, we come to the conclusion that it
is the most appropriate method to
analyze competitive
forces

and produce a winning strategy
to counter those competitive forces in USCENTCOM
market
space
.








2

Literature Review

Most

authors
have high confidence in
using
Porter’s F
ive Forces analytical
method

to
analyze

competitive market forces and formulate a winning strategy to counter competitive market forces
in an industry
.
Two authors

Wei
-
Ming and Irene Siaw successfully

used
product
differentiation
strategies to co
unter the competitive forces in the

internet bank
ing
industry. The other authors
performed
in
-
depth survey of

competitive
market forces in e
-
commerce, mobile phone, and
professional services industries
.


The authors also found competitive
forces, which

were

weak and not relevant.
Generally,

all
authors
used Porter’s Five Forces to gain a competitive advantage in the
industry, outperform,

and dislodge incumbents in the
ir respective industries
.
Mich
ae
l E. Porter in his
classic
paper
introduced

the Porter Five Fo
rces analytical method. He
cautioned that a s
trategy analyst
could

undermine the industry structure by creating new kinds of competition, which will not allow any
company to win in the industry. Wei
-
Ming and Kang
-
Wei
found the competitive forces in the
Taiwanese public sector industry using Porter’s
Five Forces analytical method and then
used
cost
leadership and
service
differentiation strategies to counter the competitive forces in the

Taiwanese
public sector

industry.
Both researchers also found professional services firms deeply
impacted by competi
tor rivalry. Competitors can use price reduction, service enhancement and
social networks to win contracts.
Some of the

authors also advocated the use of product
differentiation strategy to counter competitive forces in the banking industry. Irene and Alec

also
found that the internet has lowered the barriers to entry in most industries, a fact applicable to
other service industries also.
Yeo and Huang explored competitive forces in mobile phone e
-
commerce industry. They found brand names are
significant

ba
rriers to entry into the mobile
phone e
-
commerce industry. It is very hard to capture market share from an established industry
player with established brand name.

There is a r
isk of b
usiness

failure or collapse
if the analyst identifies
incorrect or
irrelevant
competitive forces

in an industry
.
Academic researcher Sritkant Parthasarathy explored the
competitive forces in Indian business industry. Sritkant found state protectionism and lack of
infrastructu
re to be barriers to entry in the

Indian
busine
ss
industry.
He also found suppliers in
developing countries could pressure incumbents by providing low quality products.
Moreover,

buyers
in developing countries
are
more
fixated and sensitive to price of a product than quality of
a product.


Carle, Axha
usen and Wokaun studied the competitive forces in the fuel cell market using
Porter’s Five Forces.
These researchers modified Porter’s Five Forces

analytical

method
to
include three additional competitive forces namely infrastructure and fuel, government p
olicy
and investments. The

researchers

found market penetration of fuel cell technology is heavily
dependent on government
subsidies and
incentives.
N
ew
untested
technologies,
have great
difficulty in

penetrating a market with deeply entrenched incumbe
nts

like the U.S. oil industry
without U.S government backing.


Prescott and Grant evaluated 21competitive strategies including Porter’s Five Forces.
Prescott
and Grant

found Porter’s Five Forces
analytical method
to be

expensive
for small business.






3

Typically
, data collection for Porter’s Five Forces

research project
costs
$10,000
to $
50,000

dollars
.
Both researchers advocated use of C
ase study, personal interviews and literature search

to collect data for Porter’s Five Forces
. Prescott and Grant also stated t
he accuracy of Porter’s
Five Forces is highly dependent upon the technical, interpersonal, conceptual, diagnostic and
analytical skills of the analyst.


Key strength of Porter’s Five Forces analytical method described across the literature was the
structu
red method of strategy formulation by countering competitive forces in a market space,
and the repeatability of the method across different industries. The key weakness of Porter’s Five
Forces is the time and expense needed to collect data for the method,
the need for regeneration
and analysis of data after passage of time and the need for an expert analyst to make sense out of
collected data.







4

Description

Strategy analysts analyze the competitive forces, and formulate a competitive winn
ing strategy in
any

industry using

Porter’s Five Forces analytical method
. An intelligence analyst can use
Porter's

Five Forces analytical method to analyze strategic intelligence problems. U.S.
intelligence analysts can use Porter’s Five Forces to analyze competitive market

forces in
Chinese markets and formulate a winning strategy
for

U.S. companies to gain a foothold in
Chinese markets. V
ice versa,
U.S. analysts can study
how Chinese and Indian companies are
using
Porter’s Five Forces analytical method to counter
competiti
ve forces in U.S. market to gain
a foothold in the U.S. market space.

Porter
's

Fi
ve Forces analytical method

is

a powerful

tool
for
performing economic
competitive
analysis
of

foreign markets
.

Michael Porter a Harvard Business School professor created
Port
er'
s Five Forces analytical
method.
Since
the method
’s

publication,
in
Harvard Business Review 57,

March


April 1979,
pages 86
-
93, the method

has become one of the most im
portant business strategy tools
.
Porter's
Five forces

analytical method

is
shown gra
phically
in figure 1 and also
outlined

below.


Figure
1

Porter's Five Forces that shape industry competition





Threat of new entrants to an industry

New entrants into an industry start price wars, gain market share and bring disruptive
technology into the industry.







5




The power of suppliers in an industry

Suppliers have power in an industry, if they supply unique product not found elsewhere.




The power
of buyers in an industry

Buyers can be very powerful and companies typically have very low negotiating power
against strong buyers. Strong buyers can also set prices and play one competitor against
another competitor.




Threat of substitute
Services/Products

Changes created in

industry competitive structure by introduction of a substitute
service/product.




Rivalry among existing competitors

Rivalry amongst competitors in a market space can affect profitability in the industry and
make it una
ttractive for new entrants into the market space. Established competitors with
highly successful examples of past performance can be very hard to dislodge.


The strength of the Porter's Fi
ve Forces analytical method

is
the structured manner in which it
allows an analyst to
analyze
competitive market forces like buyer power, threat of new entrants
,
bargaining power of suppliers, threat of substitute products,
and rivalry

amongst existing
competitors

in an industry and the
n creating a winning strategy to counter those competitive
market forces.
After
analyzing all the five
competitive
forces, the strategy analyst can keep the
overall structure of the industry in mind instead of focusing on any one
competitive
force.
Porter'
s Five Force
s analytical method helps

in
forecasting

the competitive positions of
a
company

in any industry. The weakness of Porter's Five Forces analytic method is that
it is time
consuming and costly to execute, making the method
unfit

for small
enterpri
ses
. Additionally
the
strategy analyst can misuse
the analytical
method to undermine the industry structure, creating
new types of competition, which
will not
allow any company to win in the
industry.
(Porter,
2008)


Sources


Porter, Michael, E. (2008). Th
e Five Competitive Forces That Shape Strategy
-

Harvard
Business Review. (pg 79
-
93). Retrieved December 2, 2010, from
http://hbr.org/2008/01/the
-
five
-
competitive
-
f
orces
-
that
-
shape
-
strategy/ar/pr








6

Strengths

and Weaknesses


Strengths



Porter’s Five Forces

can effectively analyze buyer power in an industry

Porter's Five Forces analytical method allows the analyst to analyze the buyer's market
influence and power.
Strong buyers have the ability to manipulate the industry and
initiate

price wars between industry players.





Porter’s Five Forces
can effectively analyze threat of new entrants in an
industry

Porter's Five Forces analytical method allows the analyst to analyze the threat of new
entrants in an industry.
If barriers to entry are low for an industry, for example in internet
banking, then every new company with a stellar idea can be successful in t
he industry.
Low barriers of entry can be bad for incumbent players in the market place and good for
new companies wanting to enter the market place.





Porter’s Five Forces

can effectively analyze bargaining power of suppliers

Porter's Five Forces analytical method allows the analyst to analyze
the

bargaining power
of suppliers. In cases like computer chip manufacturers who have
rely

heavily on silicon
manufacturers, the suppliers can be very powerful and will use their power to

sell
products at above market rates.




Porter’s Five Forces
can effectively analyze threat of substitute products

Porter's Five Forces analytical method allows the analyst analyze the threat of
substitute

products.
D
ifferent types of facial soaps sold in
a
supermarket
in the

$2 to $5 dollar range
are prime examples of substitute products.

The large number of
facial soap
choices
c
reates a powerful competition amongst the soap producing
companies. The

only way
such companies can be successful is via
product
differentiation and price competitio
n
.





Porter’s Five Forces
can effectively analyze rivalry amongst existing
competitors

Porter's Five Forces analytical method allows the analyst to effectively analyzed rivalry
existing amongst competitors. If there is s
trong rivalry amongst competitors for example
between Intel Corporation and AMD Corporation, both producing computer
-
processing
chips (CPU) for computers. The rivalry between incumbents in a market place can
typically lead to price
wars, which

damage both competitors.
C
ompetitors
normally
follow

certain rules allowing
all

competitors to have a market share in the industry. It is
rare to see a sole incumbent in a market place, such a position in the market place is not
viable for long, and usual
ly a
competitor

comes along to upset the sole incumbent in the
market place.




Porter’s Five Forces uses
s
tructured
a
pproach







7

Strategy analyst
uses

a s
tructured
approach to examine competiti
ve forces affecting
industries and formulate a winning strategy. The

analyst then distributes the winning
strategy to decision makers.




Porter’s Five Forces is
b
asis for
additional

in
-
depth analysi
s


Porter’s Five Forces analytical method provides

additional information for an
in
-
depth
analysis
.


Weaknesses



Porter’s
Five Forces can undermine industry structure

Strategy analyst can use Porter’s Five Forces method to undermine the industry structure,
creating new types of competition, which do not allow any company to win in the
industry.




Porter’s Five Forces requires

experienced analysts


Strategy analyst can mistake certain attributes of the industry as its underlying forces for
example; government regulation is not a one of the Porter’s Five Forces in an industry
but a factor influen
cing the Porter’s Five Forces.




Porter’s Five Forces expensive and long
lead
-
time

Porter’s Five Forces is
expensive and takes a long time to execute and deliver results to
the decision maker.


Sources

Porter, Michael, E. (2008). The Five Competitive Forces That Shape Strategy
-

Harvard Business
Review. (pg 79
-
93). Retrieved December 2, 2010, from
http://hbr.org/
2008/01/the
-
five
-
competitive
-
forces
-
that
-
shape
-
strategy/ar/pr











8

How

to u
se Porter’s Five Forces analytical method

The
seven
-
step

concept
map

in figure 2

depicts

how to apply Porter’s Five Forces analytical
model to any

strategic

competitive

intelligence
problem.
T
he analyst will use research tools like
strategic business intelligence databases, open source internet research, interviews with industry
experts, focus groups, market/consumer surveys and financial reports to gather competitive
information abou
t market forces. Examples of strategic business intelligence databases could be
LexisNexis, Dun & Bradstreet, Frost & Sullivan, Gartner, Global Insight, Stratfor,
Eagle Eye
and
Plunkett Research.

Figure 2 shows a c
oncept map of
Porter's Five Forces analyti
cal model
.



Figure
2

Concept map
of Porter's Five Forces

analytical method


Porters Five Forces first step


Strategy analyst will a
nalyze barriers to entry in

an industry
.
Analyst will use

research tools to
collect data
on
sources

of barriers to entry into an industry.
Examples of

barriers to entry in an
industry
are

economics of scale, product differentiation, capital requirement

and switching costs.







9


Porter’s Five Forces second step

Analyst will a
nalyze bargaining power o
f buyers in an industry
.
Analyze will u
se research tools
to collect data on

buyer’s influence and power in
an
industry. Analyst could examine buyer
influence by looking at volumes purchased by the buyers,
product differentiation

and switching
costs.


Porter’s Five Forces third step

Analyst will a
nalyze bargaining power of suppliers in an industry
.
Analyst will u
se research tools
to
collect data on

supplier’s influence and power in
an

industry. Analyst could examine supplier
influence and power by check
ing the number of suppliers, lack of substitute products in the
industry and how important is the
supplier’s product to the
buyer
.


Porter’s Five Forces fourth step

A
nalyst will a
nalyze threat of substitute products
.
Analyst will u
se research tools to
coll
ect data
on

threat of substitute products in the industry. Analyst can
check for

substitute products
and
their pricing in the industry.


Porter’s Five Forces fifth step

Analyst will a
nalyze intensity of rivalry among existing competitors
.
Analyst will u
se research
tools to
collect data on

intensity of rivalry amongst existing competitors. Analyst can examine if
there is intense rivalry amongst existing competitors in the market. Intense competitor rivalry can
trigger damaging price wars in the indust
ry.


Porter’s Five Forces sixth step

Compile c
ollect
ed

data on
all five
competitive market
forces into Porter’s Five Forces
framework

shown in figure 2
. Identify the most powerful and threatening competitive market
force preventing your company from being successful in the market place. Formulate a
competitive strategy to counter and defend against the

most imminent market threat to your
company.

Distrib
ute competitive strategy to decision makers.


Porter’s Five Forces seventh step


Identify industry opportunities using Porter's Five Forces
framework
.
Distribute strategy and
opportunity findings to decision makers.



Sources

Po
rter, Michael, E. (2008). The Five Competitive Forces That Shape Strategy
-

Harvard Business
Review. (pg 79
-
93). Retrieved December 2, 2010, from
http://hbr.org/20
08/01/the
-
five
-
competitive
-
forces
-
that
-
shape
-
strategy/ar/pr








10

Personal Test Case

I applied Porter’s Five Forces analytical
technique to find answers to
my
analytical question “
Is
company TNISO in a position to win contracts for Open Source Intelligence serv
ices focusing
on the Middle East and South East Asia with Central Command?


I used the following three
evaluation
criteria to
assess

Porter's Five Forces

analytical method
:




Formulation of competitive business strategy
:

Formulate a competitive
business
strategy to win contracts in
US
CENTCOM market.




Repeatability
:

Apply

Porter's Five Forces
analytical technique

in other markets

besides
USCENTCOM.




Ease of use
:

How easy is it to create a potential winning business strategy u
sing
Porter's Five Forces
analytical technique?


I believe
Porter's Five Forces analytic
technique

is the most appropriate method to analyze

and
counter

the competitive
market

forces in

U.S. Central Command

market.

I then used
Porter’s
Five Forces to
produce a winni
ng strategy on how to capture and defend
a
market segment in
USCENTCOM market

for TNISO.

The competitive forces and the winning strategy
were

then
presented to the decision maker.
The following
seven
steps

previously described in “How
-
to”
se
ction
will depict how I applied Porter’s Five Forces analytical method on
my

personal test case
analytical question.


Porter’s Five Forces
first step
-
Research and analyze barriers to entry in
USCENTCOM
market place


I researched and a
nalyze
d

barriers

to e
ntry into USCENTCOM market space

using
Booz Allen
Hamilton strategic business intelligence websites

shown in

f
igure
3
.

My research found barriers
to entry in USCENTCOM market to be high.
U.S. Government regulations stipulate provision of
analytical support to USCENTCOM by
U.S. based and U.S. owned companies with cleared
personnel
holding

top secret/SCI clearance

processed through Defense security services
.
Foreign
owned or affiliated

compa
nies for example

French or Israeli defense contracting companies with
foreign employees cannot bid on USCENTCOM contracts. Even U.S. owned companies, which
have hired foreign workers on H
-
1 work visa’s are ineligible for bidding on USCENTCOM
contracts.









11


Figure
3

Specialized databases used to perform literature search for Porter's Five Forces analytical method


Porter’s Five Forces
second step
-
Research and analyze bargaining power of
buyers in USCENTCOM
market place


I researched

and a
nalyze
d
the
bargaining

power of
U.S. Government

in
my personal case
concerning
USCENTCOM industry
using
Booz Allen Hamilton strategic business intelligence
websites shown
in Figure 3
.
My research found the bargaining power of the buyer i.e. U.S
Government to be very strong.
I

examine
d

U.S. Government

influence by looking at
professional
services

purchased by the
U.S. Government
, differentiation in products and switching costs.

US
Govern
ment has minimal switching cost; the U.S. Government can switch suppliers without any
detrimental effects to its contracts.

In
my

pe
rsonal
test
case, the U.S. Government has very strict
contracting regulations and service provision regulations.



Porter’s

Five Forces
third step
-
Research bargaining power of suppliers in
USCENTCOM
market place

Using Porter’s Five Forces I
a
nalyze
d

bargaining power of suppliers in an
USCENTCOM
industry using
Booz Allen Hamilton strategic business intelligence

websites shown i
n Figure 3.
I
found the

bargaining power of suppliers to be very low in USCENTCOM industry. The U.S.
government has full control on selection, and choice of professional services providers in the
USCENTCOM
market place
.


Porter’s Five Forces
fourth
step
-
Research and analyze threat of substitute

products/services in USCENTCOM
market place

I a
nalyze
d

threat of substitute products

in the USCENTCOM market

using Booz Allen Hamilton
strategic business intelligence websites shown in Figure
4
.

I researched a
nd
examine
d

if there are
substitute products in the industry, what
were

their pricing in the
USCENTCOM
market place
.

In
my research, I found the

t
hreat of substitute services
in

USCENTCOM
to be
high.

The
source of






12

the substitute services is

other small bus
iness providing analytical support to USCENTCOM like
Strategic Solutions Unlimited
,
S4 Inc
,

The Masy

group

and
Cambridge International Systems
.



Figure
4

Eagle Eye a federal

business intelligence tool

used to collect data for substitute services.


Porter’s Five Forces
fifth step
-
Research and analyze intensity of rivalry amongst
existing competitors

I a
nalyze
d the

intensity of rivalry among existing competitors

in the USCENTCOM

industry

using Booz Allen Hamilton strategic business intelligence
websites shown in Figure 3.

I
researched and

found the following
four equally balanced primary
incumbents

(
SRA
international, Booz Allen Hamilton, SAIC, and CSC
)

in the USCENTCOM market. Due to
intense competition amongst the four
incumbents,

there
have be
en frequent damaging price wars

on products/services provided to USCENTCOM
.

U.S Government has regulated the competition
amongst incumbents, by discouraging sole biding by any

one incumbent.


Figure
5

Centurion research solutions

used to collect and analyzed rivalry amongst incumbents







13


Porter’s Five Forces
sixth step
-
Research and analyze all five forces together


I c
ompile
d

all
the
five
competitive
forces into Porter’s
Five Forces framework shown in figure
2, identified the most
powerful,

and threatening competitive market force
s
.

The most powerful
and imminent market threats preventing TNISO’s success in the USCENTCOM market place are
the threat of substitute services from other small business owners and intense rivalry amongst
f
our incumbents.

I f
ormulate
d a competitive strategy to counter

the
two

imminent market threat
shown above, by
formulating
a

combination of
price leadership, service differentiation,
and
teaming with all four incumbents in USCENTCOM market space
.



Porter’
s Five Forces
seventh step
-
Identify opportunities

in USCENTCOM market
space


I identified

the following
opportunities
in USCENTCOM market space
using
Porter's Five
Forces framework shown in figure 2.



TNISO provides embedded analytical support to supplemen
t client analyst in theater.
Few firms are providing analysts who will deploy to theater.



TNISO
provided favorable contracting terms by U.S. Government

to compete with other
incumbents in USCENTCOM market.



TNISO
could form

partnering

agreements with big four incumbents and other
competitors
on all USCENTCOM contracts
.



TNISO served well by high barriers of entry into USCENTCOM market place.



I used three criteria to evaluate the effectiveness of Porter’s Five Forces analytical method

in my
personal test case. The three criteria given below:


Formulation of competitive strategy criteria:

Porter’s Five Forces analytical method has
successfully fulfilled
the formulation of competitive strategy criteria

in my personal test case
.
Porter F
ive Forces

was used to

formulat
e

a winning strategy for TNISO to counter the
competitive forces in USCENTCOM market.


Repeatability criteria:

Porter’s Five Forces analytical method has successfully fulfilled the
repeatability criterion in my personal test

case. I
was able to

use Porter’s Five Forces repeatedly
to re
-
analyze competitive forces in USCENTCOM market after
certain market changes

or
passage of time
.


Ease of use criteria:

Porter’s Five Forces
analytical method
scored low in the
ease of use

criteria in my personal test case. Data collection and analysis of bargaining power of suppliers in
USCENTCOM industry is a complicated, time consuming and expensive task requiring use of
experienced analysts and specialized
expensive databases shown in t
able 1.


In conclusion,
Porter’s Five Forces analytical method
successful
fulfilled the
three
evaluation
criteria

in my personal test case
.
Primary challenge in using Porter’s Five Forces was the
long
lead
-
time

taken to collect, analyze and
disseminat
e

the competitive strategy to decision makers
.

I






14

will not recommend use of Porter’s Five Forces for small companies with limited research
budget and short to medium project time lines.

To overcome
the cost and
long

lead time
challenge

I h
ave

used
Booz Allen
Hamilton’s strategic business intelligence
analytical
research
website and tools
.







15

For Further Information


Please consult the following resources given below fo
r further information on

Porter’s Five
Forces analytical technique.


Porter, Michael E. (1998)
.
Competitive strategy: techniques for analyzing industries and
competitors.

New York, New York: Free Press.


Porter, Michael, E. (2008). The Five Competitive Forces That Shape Strategy
-

Harvard Business
Review. (pg 79
-
93). Retrieved December 2, 2010, fro
m
http://hbr.org/2008/01/the
-
five
-
competitive
-
forces
-
that
-
shape
-
strategy/ar/pr


Porter, M., How Competitive Forces Shape Strategy.
Harvard Business Review,
March
-
A
pril
(1979), p. 8.


Prescott, J. E., & Grant, J. H. (1988). A Manager's Guide for Evaluating Competitive Analysis
Techniques.
Interfaces
, 18(3), 10
-
22. Retrieved from EBSCO
host
.










16

Annex 1.

Detailed Literature Review


Given below are seven detailed
literature reviews defining what is


Porter’s Five Forces
analytical technique and then providing examples of how Porter's Five Forces have been used to
research competitive forces in a industry. After researching the competi
tive forces in an industry,
the

analyst formulates a
winning strategy to gain a winning position in the market.

The analysts
frequently counter competitive market forces using price l
eadership and differentiation
strategies.


The Five Competitive Forces That Shape Strategy

Porter, Michael, E. (2008). The Five Competitive Forces That Shape Strategy
-

Harvard Business
Review. (pg 79
-
93). Retrieved December 2, 2010, from
http://hbr.org/
2008/01/the
-
five
-
competitive
-
forces
-
that
-
shape
-
strategy/ar/pr



Name of Analytic Technique


Porter’s Five Forces


Purpose

The purpose of this article is to inform and advocate

the use of Porter's Five Forces analytical
technique in formulation of a
competitive strategy. We create the competitive strategy
formulated by analyzing the underlying five forces in an industry. In this article, the creator of
Porter’s Five Forces analytic technique economist and Harvard University professor Michael E.
Porter

advocates and reaffirms the workings of the Porter’s Five Forces analytic technique.


Strengths and Weaknesses

Strengths:


1.

Analyzes
bargaining
power
of buyers
in a industry

2.

Analyzes threat of new entrants in a industry

3.

Analyzes bargaining power of supplie
rs

4.

Analyzes threat of substitute products

5.

Analyzes rivalry amongst existing competitors

6.

By considering all the five forces shown above, the strategy analyst can keep the overall
structure of the industry in mind instead of focusing on any one force.

Weakn
esses:

1.

Strategy analyst can use Porter’s Five Forces method to undermine the industry structure,
creating new types of competition, which do not allow any company to win in the
industry.

2.

Strategy analyst can mistake certain attributes of the industry as
its underlying forces for
example; government regulation is not a one of the Porter’s Five Forces in an industry
but a factor influencing the Porter’s Five Forces.








17

Description

Strategy analyst use’s Porter’s Five Forces analytical technique to create a competitive strategy
that takes into account the competitive forces in the industry. The competitive strategy will help
the company maintains its leadership in the industry and sa
feguard the company from attack by
rival competitors. Porter’s five forces are threat of new players in the market, bargaining power
of the suppliers, bargaining power of the buyers, threat of substitute services, and rivalry
amongst existing competitors i
n the market place.
Five
steps for
Porter’s Five Forces

analytical
method are

given

below
.

1.

Threat of new entrants to an industry:

New entrants into an industry start price wars, gain
market share and bring disruptive technology into the industry. For example, Netflix an
online movie rental company has gained market share from Blockbusters a chain of
video/game rental outlets. If bar
riers to entry into an industry are high, it becomes very
difficult for new entrants to gain market share. Government policy
is a
major

barrier to entry
into certain intelligence markets
solely

served by U.S. companies with U.S citizen
employees. A small c
ompany providing open source intelligence services to the U.S. Central
Command market space will need to examine the barriers of entry into market.

2.

The power of suppliers in an industry:

A professional services company treats its employees
as input. The e
mployees or suppliers for U.S. Central Command typically have to be U.S.
citizens with high
-
grade security clearances. Such a small pool of input to a company can put
pressure on the company to be competitive in an industry.

3.

The power of buyers in an indu
stry:

U.S. Central Command or U.S. government is a very
powerful buyer in the defense contracting industry. Companies typically have very low
negotiating power with such strong buyer. Strong buyers can also set prices and play one
competitor against anothe
r competitor.

4.

Threat of substitute Services/Products:

The

introduction of a subst
itute service/product
strongly affects industry structure.

For example, small women owned business Alaska based
business employing in contract un
-
cleared employees in theater

supplying open source
intelligence to U.S. Central Command could take away market share from U.S. based
company with cleared employees.

5.

Rivalry among existing competitors:

Rivalry amongst competitors in U.S. Central Command
market space can affect profit
ability in the industry and make it unattractive for new entrants
into the market space. Established competitors with highly successful examples of past
performance can be very hard to dislodge. Examples are defense contractors who are prime
contractors on

U.S. Central Command contracts.

Steps to create a competitive strategy:




Analyze

supplier

bargaining power in U.S. Central Command market space.



Analyze buyer bargaining power in U.S. Central Command market space.



Analyze threat of new entrants in U.S.
Central Command market space.



Analyze threats of substitutes in U.S. Central Command market space.



Analyze rivalry amongst competitors in U.S. Central Command market space.







18

The strategy analyst will analyze all the five forces in the industry by performi
ng market
research, talking to suppliers, buyers, examining substitute services/products and looking at
competitive analysis of incumbents in the industry.


Uses

Analysts can apply Porter’s Five Forces analytical technique to create a competitive strategy
in
virtually any industry. We create a competitive strategy after performing analysis of the five
competitive forces driving market competition in any industry.


Comparison

Comparison is not required as this is the first source critique.


Sources Cited

The author has listed the following sources given below.

Adam M. Brandenburger and Barry J.
Nalebuff,
Co
-
opetition

(Currency Doubleday, 1996

Michael E. Porter,
Competitive

Advantage:
Creating and Sustaining Superior Performance
(The Free Press, 1998)

Mich
ael E. Porter,
“Strategy and the Internet” (HBR, March 2001).


Most Informative

The most informative item of this source is the detailed explanation of what is Porter's Five
Forces analytical method, how can it be applied to formulate a competitive strateg
y in any
industry, what are the pitfalls to avoid and benefits of using this method.


Source Author

Michael E. Porter is the author of this article. Mr. Porter is also the creator of the Porter’s Five
Forces analytic method. Mr. Porter is very qualified t
o talk objectively about this analytic
method as he has created this method and used it extensively in various industries.



Source Reliability

Dax Norman’s trust evaluation worksheet is not used to check the source reliability, as this is not
an online we
b source, but an article written by the creator of the Porter’ Five Forces analytical
technique.


Critique Author

Fuad Khan

fuadkhan@yahoo.com

Mercyhurst College


Erie PA

Advanced Analytic Techniques Course

12/19/
2010.

Link to my wiki
:

http://intel520.wikispaces.com/







19


Use of Leadership and Differentiation Strategies by Professional Service
Firms: A Case Study

Wei
-
Ming, O., & Kang
-
Wei, C. (2007).

Use of Leadership and Differentiation Strategies by
Professional Service Firms: A Case Study.
International Journal of Management
,
24
(3), 477
-
488. Retrieved from Business Source Elite database.


Name of Analytic Technique

Porter's Five Forces


Purpose

The purpose of the case study

is to study the strategic positioning of a transportation engineering
services firm in the Taiwanese public sector market space.


Strengths and Weaknesses

The strategic researchers Wei
-
Ming and Kang
-
Wei did not list any stren
gth or weakness of the
Porter's Five Forces analytical method in their case study.


Description

Strategic researchers Wei
-
Ming and Kang
-
Wei obtained a comprehensive understanding
of

competitive market forces affecting professional transportation engineer
ing firm in the
Taiwanese public sector market space using the Porter's Five Forces analytical method.


Uses

This case

study

demonstrates that Porters Five Forces
is used to analyze competitive
market
forces influencing the transportation industry.


Comp
arison

The strategic researchers Wei
-
Ming and Kang
-
Wei used Porter’s Five Forces in their case study
of analyzing the market forces in Taiwanese transportation engineering industry. The first source
critique article found at Porter, Michael, E. (2008). The

Five Competitive Forces That Shape
Strategy
-

Harvard Business Review. (pg 79
-
93). Retrieved December 2, 2010, from
http://hbr.org/2008/01/the
-
five
-
competitive
-
fo
rces
-
that
-
shape
-
strategy/ar/pr
.
Described

how to
use the Porter's Five Forces analytical technique by the technique's author.



Most Informative

The

case study

provided

eight
points

very

informative points
given below
:




Cost leadership is essential for
professional services firms selling to strong buyers.




Service differentiation is very important for professional services firm, in order for
them to stand out from the crowd.





New professional services firms usually lack experience and human capital to
bid for
large projects. They may need sub
-
prime partners in a contract.







20



Professional services firms impacted by competitor rivalry. Competitor use price
reduction, service enhancement and social networks to win contracts.



The powerful buyer
is

the single m
ost important threat to

a professional transporta
tion
engineering services firm

in Taiwanese public sector market.



Results compiled by strategic researchers Wei
-
Ming and Kang
-
Wei can be re
-
used by
other strategy analysts in other professional transportatio
n engineering services firms
in other countries and markets.




Porter's Five Forces methodology takes a time to

research market forces

and

is
not

viable for

very short
lead
-
time

projects.




Porter's Five Forces methodology is more useful on strategic level and
normally not
used at a tactical level.


Source Author

The two authors of this
case study

are strategic researchers Wei
-
Ming and Kang
-
Wei

who

have
performed an in
-
depth strategic analys
is of a professional
transportation
-
engineering

firm located
in Taiwan. The strategic researchers have used both the SWOT and Porter's Five Forces
methodology to formulate recommendations for professional transportation engineering services
firms.


Source

Reliability

The source

rated to have

high credibility according to Dax Norman trust scale.



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21

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stakeholder

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tation. The Journal of Brand Management
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Great Barrington, MA: North River Press.


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Long Range Planning
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31(5), 695
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702.


Hitt, M. A., Bierman, L., Shimizu, K. & Kochhar, R. (2001). Direct and moderating ef
fects of
human capital on strategy and performance in professional service
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based
perspective. Academy of Management Journal
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44(1), 13
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Bergeron, J. (2005). Internet versus
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McCosh, J. G. (2003). A strategic analysis of the hospital industry and HCA incorporated.
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McDonald, M. H, B
,

De Chernatony, L., & Harris, F. (2001), Corporate marketing and service
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,

Harvey, M
,

Autry, C, W
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&

Bond, E, U, (2004), Dual
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perspective SWOT: A
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,

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22

Ou, W,
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M, (1999), Shopping mode choice behavior. Unpublished master's thesis. Northwestern
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n, IL.


Ou, W.
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M., Abratt, R,, & Dion, P, (2006), The influence of corporate reputation on store
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on and
Control (8th ed,) New York: Irwin McGraw
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Hill.


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shape strategy. Harvard Business Review
,
57(2),
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145.


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,

New York: The Free Press.


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,

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74(6), 61
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,
79(3), 63
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78.


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,

21(4),
514
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523.








23

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Critique Author

Fuad Khan

fuadkhan@yahoo.com

Mercyhurst College

Erie PA

Advanced Analytic Techniques Course

01/06/2011

Link to my wiki:

http://intel520.wikispaces.com/








24

An Analysis of the Impact of the Internet on Competition in the Banking
Industry, using Porter's Five Forces Model

Siaw, I., & Yu, A. (2004). An An
alysis of the Impact of the Internet on Competition in the
Banking Industry, using Porter's Five Forces Model.
International Journal of Management
,
21
(4), 514
-
523. Retrieved from Business Source Elite database.


Name of Analytic Technique

Porter's Five For
ces


Purpose

Academic researchers

Irene Siaw

and

Alec Yu wrote a paper on the emergence of the internet on
the competitive landscape of the

banking

industry. Both researchers advocate harnessing the
power of the internet in the banking industry.


Streng
ths and Weaknesses

Academic researchers

Irene Siaw

and

Alec Yu did not discuss the strengths and weaknesses of
the Porter's Five Forces analytical model.




Description

Academic researchers

Irene Siaw

and

Alec Yu

studied how

the internet was affecting
competitive dynamics of banking industry

using the Porter's Five Forces analytical method
.


Uses

This paper

demonstrates that Porters Five Forces
is
used to analyze the market forces influencing
the

internet banking

industry.


Comparison

This
paper

is similar in methodology to the used by strategic researchers Wei
-
Ming and Kang
-
Wei (Wei
-
Ming, O., & Kang
-
Wei, C. (2007). Use of Leadership and Differentiation Strategies
by Professional Service Firms: A Case Study.
International Journal of Management
,
2
4
(3), 477
-
488. Retrieved from Business Source Elite database.).


The authors of both
papers

have
practically applied Porter's Five Forces to study the competitive forces present in Taiwanese
professional services industry and the banking industry. Both the

papers
present clear
instructions on how to apply Porter's Five Forces analytical technique.


Most Informative

I found the following

three

items most informative in this
paper
, which I can also use,

in my final
project.





Porter's Five Forces analytical

method can also be used in dynamic evolving industries to
formulate a competitive strategy. Using Porter's Five Forces the academic researchers






25

Irene Siaw and Alec Yu advocated the use of internet banking long before it became a
successful and widely used

technology.




Internet has lowered the barriers of entry in most industries.
The internet has provided
d
irect access to customers and a more economical al
ternative distribution channel



Product differentiation is very important
otherwise,

it is easy for th
e buyer to switch
products. This fact is also reinforced by article by strategic researchers Wei
-
Ming and
Kang
-
Wei (Wei
-
Ming, O., & Kang
-
Wei, C. (2007). Use of Leadership and
Differentiation Strategies by Professional Service Firms: A Case Study.

Internati
onal
Journal of Management
,
24
(3), 477
-
488. Retrieved from Business Source Elite
database.).



Source Author

Academic researchers

Irene Siaw

and

Alec Yu

are

the authors of this paper. Irene Siaw is an
academic researcher and Alec Yu works as head of Cisco

Systems Wireless division Hong Kong.
Alec Yu as a Cisco Systems executive a company whose routers power the internet is in a unique
position to study the impact of the internet on competitive landscape of the banking industry.


Source Reliability

The so
urce

rated

to have

high credibility according to Dax Norman trust scale.


Sources Cited

Birch, D & Young, M.A., Financial Services and the Internet
-

What Does Cyberspace Mean for
the Financial Service Industry?
Internet Research: Electronic Networking A
pplications and
Policy,
Vol. 7(1997), No.2, pp. 120
-
128.


Brennand,
C,

Next Steps in Financial E
-
Services in Asia
-

Lessons from other Market.

Internet
World Hong Kong,
Financial Services Summit Nov 1999.


Cisco Systems Inc., Internet Business Solutions
Group. The Banking Industry and the Internet
-

A View of the Impact of Internet Business Models on the Future of Banking,

July

1999.


Crede, A., International Banking and the Internet in Cronin, M.J. (Ed.),
Banking and Finance on
the Internet,
Van Norstran
d Reinhold, New York, NY, pp. 271
-
305, 1998.


Czemiawska, F. & Potter, G.,
Business in a Virtual World
-

Exploiting Information for
Competitive Advantage,
Macmillan Business, 1998.


Engelman, L.,
Interacting on the Internet,
Times Mirror Higher Education G
roup, Boston, MA,
1996.


Emst & Young, E
-
Commerce: Customer Relationship Management.
Special Report on
Technology in Financial Services,
1999a.







26


Emst & Young, FS
Internet Value Creation Study,
1999b.

FIND/SVP (1997),
http://www.findsvp.com
.


Humphreys, K., Banking on the Web
-

Security First Network Bank and the development of
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Banking and Finance on the Internet,
Van
Norstrand Reinhold, New York, NY, pp. 75
-
105, 19
98.


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-
A Manager's Guide,
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-

Wesley
Longman, USA, 1997.


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36.


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and the Banks' Strategic Distribution Channel Decisions.
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337.


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-
April
(1979), p
. 8.


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On Competition,
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Sheshunoff, A. The wait is over for Internet Banking,
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(1999), No.6, pp. 18
-
24.


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July 1999.


Watson, R.T., Berthon P., Pitt, L.F., & Zinkhan G.M.,
Electronic Commerce: The Strategic
Perspective,
Orlando, FL: The Dryden Press, 2000


Critique Author

Fuad Khan

fuadkhan@yahoo.com

Mercyhurst College

Erie PA

Advanced Analyti
c Techniques Course

01/15/2011

Link to my wiki:

http://intel520.wikispaces.com/








27

Mobile E
-
Commerce outlook

Yeo, J., & Huang, W. (2003). Mobi
le E
-
Commerce Outlook.
International Journal of
Information Technology & Decision Making
,
2
(2), 313. Retrieved from Academic Search
Complete database.


Name of Analytic Technique

Porter's Five Forces


Purpose

Academic researchers Julia Yeo and Wayne Huang wrote a paper to identify and explore
potential business models in the mobile commerce industry using Porter's Five Forces analytical
model.


Strengths and Weaknesses

Two strengths of the Porter's Five Force
s analytical model mentioned by the academic
researchers

Julia Yeo and Wayne Huang. One the Porter's Five Forces analytical model provided
a complete evaluation of the mobile commerce industry.
Secondly,

the Porter's Five Forces
analytical model helped for
ecast

areas of mobile commerce industry suitable for investment

by
firms seeking to

gain a market share of the mobile commerce industry. The academic researchers
did not discuss any weakness of the Porter's Five Forces model.


Description

Academic researc
hers Julia Yeo and Wayne Huang

used Porter's Five Forces method to

look at
competitive

market forces present in the mobile commerce industry. The academic researchers
also used Porter's Five Forces to formulate a competitive strategy to gain a

market share

in the
mobile commerce industry.


Uses

This paper demonstrates that Porter's Five Forces analytical method used to analyze the market
forces influencing the mobile commerce industry.


Comparison

There is
an

interesting similarity between this paper and the study performed by strategic
researchers Wei
-
Ming and Kang
-
Wei (
Wei
-
Ming, O., & Kang
-
Wei, C. (2007). Use of
Leadership and Differentiation Strategies by Professional Service Firms: A Case Study.
Internatio
nal Journal of Management
,
24
(3), 477
-
488. Retrieved from Business Source Elite
database.) Both the researchers used strength, weakness, opportunities, threats (SWOT) model

in

conjunction

with the Porter's Five Forces analytical method. Julia and Wayne use
d the Porter's
Five Forces analytical method to research the threats for their SWOT model.


Most Informative

Three
informative

takeaways from this

paper are given below:








28



Brand names can be significant barrier to entry into an industry.

It is very hard
to capture
market share fro
m
established industry players with established brand name.



There is a grave almost fatal impact to a business if we create in
-
correctly identify the
wrong competitive forces in the industry and use those in

Porter's Five Force
s analytical
model. As the academic authors in the paper, stated the mobile commerce

industry should
not

duplicate

the
comp
etitive forces existing in electronic commerce industry. Instead,
the researche
rs should find key differentia
tors like location
aware
ness, which

makes
mobile commerce industry radically different from electronic commerce industry.



The paper also points to lack of data from other mobile operators in other countries to get
a more
diverse

view and different of global mobile commerce industry. This is a very
important observation, as mobile industry has leapfrogged over traditional
landline

internet in third world countries where
landline

internet is too expensive to

install
due to
both mon
etary reasons and geographic

reasons. In

most African
countries,

mobile
commerce like banking and

money transfer is performed via cell phones. In Afghanistan,
most government employees are paid monthly via cell phones.

Mobile commerce

will
also

ex
pand with

revolutionary devices
like

Apple

I
pad
, which

allow a bigger screen and
more

features useful

for mobile commerce.




Source Author

Academic researchers Julia Yeo and Wayne Huang are the authors of this paper. Julia Yeo is
an

academic student at The Unive
rsity of New South Wales, Australia.
In addition,

Wayne Huang is
an

academic student at Ohio University, USA.


Source Reliability

The source rated to have high credibility according to Dax Norman trust scale.


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[Online]
http://www.nttdocomo.com/company/index.html
, 29

September 2001.


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wsroom.com/html/what is 3g/index.shtml

28
September 2001.


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-
business communication gets personal, InformationWeek,
7 August 2000.


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-
enabled networks, Bell Labs

Technical J. (2000) 145
-
152.


A. de Haan, The internet goes wireless, eAI J. (April, 2000) 62
-
63.








29

S. Eklund and K. Pessi, Exploring mobile e
-
commerce in geographical bound Retailing, Proc.
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30



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Critique Author

Fuad Khan

fuadkhan@yahoo.com


Mercyhurst College

Erie PA

Advanced Analytic Techniques Course

01/22/2011

Link to my wiki:

http://intel520.wikispaces.com/










31

Business strategy

Parthasarathy, S. (2010).

BUSINESS STRATEGY.
Financial Management (14719185)
, 32
-
33.
Retrieved from Business Source Elite database.


Name of Analytic Technique

Porter's Five Forces


Purpose

Academic researcher Sritkant Parthasarathy

wrote a paper to inform the readers about the
competitive forces in Indian business industry using Porter’s Five Forces analytical
methodology.




Strengths and Weaknesses

The author in his

paper

did not discuss strengths and weakness of Porter's Five For
ces analytical
method.


Description

Academic researcher Sritkant Parthasarathy used Porter's Five Forces method to

look at
competitive

market forces present in the Indian business industry


Uses

This paper demonstrates that Porter's Five Forces analytic
al method
is

used to analyze the market
forces influencing the Indian business industry.


Comparison

Current article (Parthasarathy, S. (2010). BUSINESS STRATEGY.
Financial Management
(14719185)
, 32
-
33. Retrieved from Business Source Elite database) is
dif
ferent from

the study
performed by strategic researchers Wei
-
Ming and Kang
-
Wei (Wei
-
Ming, O., & Kang
-
Wei, C.
(2007). Academic researcher

Srikant Parthasarathy

is performing a country analysis of India.
Whereas Wei
-
Ming and Kang
-
Wei are performing a profess
ional services sector analysis in
Taiwan.


Sources Cited

The academic researcher has not provided any sources for his article. The academic researcher
Sritkant Parthasarathy

has published original work in a peer reviewed journal financial
management. I ev
aluated the author's source reliability and high v
alidity

(39.5)

based on the Dax
Norman's trust evaluation scale
.


Most Informative

Four
informative

takeaways from this article were as given below:



State protectionism and lack of infrastructure could be
bar
riers to entry into an industry.







32



Suppliers in

developing countries could
pressure

on the incumbents by providing low
quality products, delivered
quickly
. Opposed to developed countries where suppliers are
all producing high quality products.



Buyers are fixated more on price than quality in developing countries.



Competition amongst competitors is virtual than real in developing countries. Incumbents
have a strangle hold on the market and are almost impossible to remove. Competition is
also tie
red and is most intense at the lowest levels, and there is almost an absence of
competition at the top.


Source Author

Academic researcher Sritkant Parthasarathy is head of Chakra Consulting
and

visiting professor
of strategy at Christ University.


Source Reliability

The source rated to have

high credibility according to Dax Norman trust scale.
Trust scale = 39.5


Critique Author

Fuad Khan

fuadkhan@yahoo.com


Mercyhurst College

Erie PA

Advanced Analytic Te
chniques Course

01/29/2011

Link to my wiki:

http://intel520.wikispaces.com/








33

Opportunities and Risks during the Introduction of Fuel Cell Cars

Carle, G., Axhausen, K. W., Wokaun, A., & Keller, P. (2005). Opp
ortunities and Risks during
the Introduction of Fuel Cell Cars.
Transport Reviews
, 25(6), 739
-
760.


Name of Analytic Technique

Porter's Five Forces

Purpose

Academic researchers Gian, K.W, Alexander and Peter wrote a paper to inform the readers about
the competitive forces in the fuel cell industry using Porter's Five Forces analytical model.


Strengths and Weaknesses


Academic researchers Gian, K.W, Alexande
r and Peter did not discuss strengths and weaknesses
of Porter's Five Forces analytical method.


Description

Academic researchers Gian, K.W, Alexander and Peter used Porter's Five Forces analytical
method to look at market direction and competitive market

forces present in the fuel cell
industry. At the
time,

this

paper was written it was impossible to perform a complete and precise
competition analysis for fuel cell technology because fuel cells were not available as an assembly
line product for the vehic
le market.


Uses

This paper demonstrates that Porter's Five Forces analytical method can be used to analyze the
direction and competitive market forces influencing the fuel cell industry.


Comparison

Academic researchers Gian, K.W, Alexander and Peter used Porter's Five Forces analytical
method to find market direction and competitive market forces of a non
-
commercially available
product the fuel cell . This is different from the Yeo, J., & Huang, W. (
2003). (Mobile E
-
Commerce Outlook.
International Journal of Information Technology & Decision Making
,
2
(2),
313. Retrieved from Academic Search Complete database.)
Paper

where Porter's Five Forces is
used to find the competitive forces of an existing E
-
com
merce market place.


Most Informative

Four

informative points in the paper are given below:



Authors modified
Porter's Five Forces analytical method for the fuel cell industry by
adding three additional forces, infrastructure and fuel, government policy
and
investments. The fuel cell industry requires a new fuel i.e. hydrogen and fuel distribution
network different from the existing gasoline distribution network. Clear government
policies are needed for successful market penetration of fuel cell technolog
y. Lastly
considerable financial investment is needed for the adoption of this early phase of R&D







34



Fuel cell is unproven technology hence it has strong competition from substitute
technology like natural gas, gasoline and gasoline
-
electric hybrid technolog
ies.



Market penetration of fuel cell technology is heavily dependent on government incentives
and subsidies. This means new
technologies, which do not have government backing,

might have a very tough time penetration a market with deeply entrenched incumb
ents
like the U.S. oil industry.



It will be a new paradigm where auto manufacturers are the suppliers of both the vehicle
and the fuel. Unlike the existing paradigm where the auto manufacturers are only
manufacturing the vehicle and the oil is which is ess
ential for the vehicle is supplied by a
powerful supplier.



Source Author

Academic researchers Gian, K.W, Alexander and Peter have performed detailed research on the
fuel cell industry. Gian and K.W Alexander work for Institute for Transport Planning and

Systems (IVT) is part of the
Swiss Federal Institute of Technology (ETHZ)

in Zurich
Switzerland.
Moreover,

Peter works for Paul Scherrer Institute, PSI, is the largest research center
for natural and engineering sciences within Switzerland.


Source Reliability

The source
rated to have high credibility according to Dax Norman trust scale.


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