The SWOT model, abbreviation of strengths, weaknesses, opportunities and threats", is a strategic tool, defined in 1971, for helping a company to analyze its internal context (strengths and weaknesses) and its external context (opportunities and threats), which have an impact on its activity. This model is built as a matrix, which helps the company to link and analyze the four factors to draw its strategy.
In this assignment, we aim to identify and discuss the contribution of Porter's five forces model to the SWOT analysis. In order to do this, we will first introduce Porter's five forces model.
Porter's five forces model had been developed by M.E. Porter in 1980, as a complex framework to help a company to identify the different aspects of its industry and the impacts between them and the industry. It includes the competition industry, the entrants (or the barriers to entry), the buyers, the substitutes and the suppliers of the industry. This model is one of the leading frameworks to build a strategy, it helps companies to choose and implement a strategy coherent with their environment, in order to be profitable and safe in their industry.
[...] In conclusion, Porter's five forces model needs to improve and increase its range of applications, because obviously, Porter's model is a strategic tool which helps to identify whether or not new services, businesses or products could be profitable on a market, and contributes to the weaknesses of the SWOT analysis. Therefore, this model also has limits, which however doesn't mean it is invalid. It just has to be completed by other models and used in a framework of tools of analysis. [...]
[...] The contribution and limitations of Porter's five forces model Contribution of Porter's model Porter's five forces model help the company to map out the external environment of a company or an industry in which the company competes, the external scenarios that Porter calls “forces”. Porter's five forces model contributes to the SWOT analysis, highlighting the threats posed to the company or the industry, and giving more guidelines, thanks to the model structure, to decide if it is an opportunity or a threat. [...]
[...] More than the SWOT model, it is the Porter's five forces model that highlights the different forces and impacts on or from the industry competition, gives guidance to the managers, or to the company, and helps them understand the internal and external value chain of the company, in order to draw a better strategy thanks to its analytical framework. The SWOT model is more of a list of elements, which are not all relevant. The Porter's model also helps the company to react, or prevent alliances between several suppliers so that they do not emerge as intimidating competitors by understanding the actual framework of the industry, or locating an opportunity for itself, such as a partnership. [...]
[...] Thus, Porter's five forces model helps determine more than the SWOT analysis the category in which the company has to class the elements. Porter's five forces model draws a more complex and precise analysis of the competitive position of the company than the SWOT analysis and helps understand the value chain of the company, and thus, where to cut costs, or add value, which is an important part of strategy planning. For instance, Thorntons plc, a manufacturer and a retailer of specialist chocolate, also has implemented a partnership with a card retailer. [...]
[...] The company could use all those tools to analyze its environment, in order to establish a Porter's five forces model, and then a SWOT analysis, which would lead the company to draw a coherent and relevant strategy linked with its environment analysis, its industry and its value chain and would help the company to stick to them, in order to develop a new product, service or business which could be profitable and offer a competitive advantage. Conclusion Porter's five forces model actually contributes to enrich the SWOT analysis, highlighting some dark points in the SWOT model, and providing a more detailed and structured analysis. This model is more precise regarding the different aspects of the industry. Porter's model is a strategic tool which identifies whether or not new services, businesses, or products could be profitable on a market. [...]
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