The existence of many industries, which produce similar products in a market leads to competition and rivalry amongst the firms. The maintenance of profitability in an industry is influenced by the structure of that industry. Porter developed a model, which asserts that an industry’s profitability is influenced by five forces. Porter argues that there is the rivalry, which exists amongst the industry competitors in a production or service delivery line. The extent of rivalry amongst firms changes with industries. Some industries have less intense rivalry than others have, and are said to be disciplined (Albright, 2004). Every firm in an industry will try to gain competitive advantage over others. Firms will apply different strategies to win competitive advantage, which include change of price and collaboration with suppliers.
Secondly, Porter points out suppliers as the other force, which influences an industry. Suppliers provide producing firms with raw materials, labor, and other inputs. Suppliers can influence an industry through regulating the price of materials they supply. According to Porter’s model, buyers form another great force into any industry. Buyers influence industries by determining the prices, especially in an industry with many suppliers targeting one buyer (Stacey, 2006). However, buyers may not influence the prices if they are many in the market, hence having no influence on any particular product or price of the product.
Harmony in the business sector allows any firm to enter or leave any line of production at will. This, therefore, means that competition in an industry not only comes from existing firms, but also any new entrants into the industry. Porter describes this force as the threat of new entrants. Finally, Porter describes the threat of substitutes as a force in an industry. He argues that when the prices of substitute products or services go down, this has an effect on an industry’s products (Brockmann & Lacho, 2010).
The Value of Porter’s Five-force Model in Strategic Planning Process
The selected group needs to strategize their operations to ensure that they win competitive advantage over their competitors. The porter’s five-model force is paramount in this case. The model provides a framework through which managers can understand the context in which their firm operates. This helps them to organize and plan their actions to ensure they compete effectively in the market. The model also provides managers with strategies on how they can gain competitive advantage if the rivalry is intense. The model proposes changes in prices, establishing a relation with suppliers, and using the right channels of distribution (Brockmann & Lacho, 2010). The model insists on three major features of ensuring competitive advantage. Porter argues that managers need to focus on the business, differentiate themselves, and have the control of the price.
Five force analysis of Park Nicollet Health Service
Park Nicollet Health Service is a physician group in Minnesota USA. The physician group provides health care services to patients with diabetes and heart failure. Park Nicollet is operating in a competitive industry with intense rivalry from other firms in the industry. There are many other physician groups providing the same health care services like Park Nicollet group. The group has a telephone-monitoring program for their high- risk heart failure patients. Patients make daily calls to explain of any signs or symptoms. This allows the nurses to note any symptoms early enough and intervene.
The group also has electronic patient registries, which provides with information about patients. This puts the group in a better position to have a competitive advantage over other firms in the same industry.
The group also provides services, which are convenient with their patients. Patients are their buyers, and, therefore, need qualitative and effective services. The group provides these convenient services to its customers to ensure that they win their loyalty. The physician group also provides their services at fair prices, hence maintain their customers. The patient information that the physician care team has, helps them to identify any new health care needs for their patients. The group also seeks suppliers who provide them with products and services at lower prices. New entrants pose a great threat to the group. Healthcare providers have now started entering into the industry, and it is the role of the group to ensure they maintain the competitive advantage. There has also been substitute service provision in the industry. The healthcare services that the group provides are not unique but common, which any group of physicians can provide.
Interpretation of Findings from the Analysis
According to the strategy the group has used in its service delivery, there is a higher possibility that they can have a competitive advantage over their rivals. The group has embraced technology in their service delivery making their services easy and cheap. The group has also ensured that their customers can reach them anytime, hence creating confidence in them. Their suppliers are also efficient, which furthers their service delivery. The group has also ensured that their services are affordable. This has helped them win the market and deal with the threat of new entrants and substitute services. The group also focuses on efficient suppliers whom they can work with well. The group has hired qualified nurses and caregivers. This ensures that the services offered by them are qualitative, hence creating confidence in patients. The phone service provider is reliable, hence offers an effective telephonic program to the group.
Strategic Planning Implications
The service offered by Park Nicollet group needed strategic planning in order to execute the services efficiently. Strategic planning ensures that activities are conducted effectively. Due to proper planning, the Park Nicollet group has been able to conduct its activities smoothly. Planning also ensures proper handling of emergences or unexpected eventualities (McCosh, 2003). Proper planning by the group has ensured that they have maintained their market share. Strategic planning implies that there will be effective utilization of resources. Planning involves focusing on available resources, and utilizing them efficiently to meet the intended objectives.