Competitive Forces Model, Essay Example

Michael Porter’s “Competitive Forces Model” allows us to gain a greater understanding of the competitive advantage within a variety of industries. In this model, the new market entrants, substitute products, suppliers, and customers are considered for a firm and its competitors. It is essential to understand how each of these factors impacts the relationship of these two firms in addition to the factors that leads to one firm becoming more successful than the other. The digital camera industry is particularly relevant in light of this model, as many technology companies are aiming to gain a corner on this market.

One of the most important concerns to leaders in the digital camera industry is substitute products. Although digital cameras have effectively replaced film cameras and there is little desire from customers to return to their use, these companies should be concerned with the frequency that consumers prefer to use their cell phone cameras over their product. Therefore, successful companies are those who are able to differentiate their product from the applications available for cell phone. They typically market the higher quality photo aspect of their service and market towards individuals who appreciate picture clarity and advanced photo editing options.

An additional concern to leaders in this industry is new market entrants. While occasionally smaller firms begin and attempt to compete with brand leaders, they are typically forced to close down due to their inability to offer comparable prices and quality to consumers. Therefore, existing firms do not concern themselves with competition from new market entrants, rather, each of the leaders focus on getting ahead of one another. This results in the frequent release of new and high quality products from companies such as LG and Sony.

Generally, the suppliers that the leaders of the digital camera industry select have a direct relationship with the quality and price that they are able to offer. When the raw materials for technological products are higher quality, they tend to be more expensive. Therefore, a majority of the differentiation between digital camera firms and their competitors is due to the vendors they associate themselves with. Often several digital camera companies may utilize the same vendor in order to ensure that they are using the best product available. Other times, they will avoid using the same vendor so that they may offer their customers lower prices. Thus, the selection of vendor is a way of balancing quality with price, and this is what causes the leading camera companies to become distinct.

Lastly, the customer base has an impact on whether the companies will be successful. Many customers prefer a particular brand and choose to only purchase electronics from that company. In these cases, any level of marketing and quality improvement may not impact the ability to expand their market demographics. In situations in which customers are undecided, marketing has an effective role. Customers tend to purchase products that they are able to relate to and that are marketed towards them, so it is in the best interest of leading companies to ensure that they are able to accomplish this.

Typically, a firm and its competitors are in somewhat of an equilibrium in terms of these four factors. In order for one firm to become more successful than the others, they must be able to bypass these companies at least slightly in a majority of the competitive forces. Since these forces are always changing, an effective company must be able to keep track of these changes and adjust accordingly.