Review of Porter’s five forces model
Porter’s five forces model aims at enabling organizations to develop strategies for gaining competitive advantage in the market.
The first force is the threat of new entrants. Business experts have it that this is the most prevalent force of competition in any industry (Porter, 1980). JGJ Inc. being a housing company when new companies emerge, JGJ will be forced to up its game in terms of prices, quality among others if it has to remain in the industry. Thus, new entrants will not overtake it.
The second force is the bargaining power of suppliers. Suppliers have the power to dictate the prices in a given industry by threatening to hike prices or degrade the quality of raw materials (Cox, 2002). No company would like low-quality materials. For this reason, companies will have to adhere to the terms given by suppliers. At JGJ, if the iron sheets suppliers increase prices for high-quality iron sheets, the company ought to adhere to the price changes to continue offering quality houses or else its services will be out of the market.
The third force is the bargaining power of customers. Customers have the power to dictate prices. JGJ Company must consider its customers’ reviews on prices as a way of maintaining them if they need to gain a competitive advantage in the housing industry by maintaining the customers.
The fourth force is the threat of substitutes. If there are other companies offering housing services, JGJ ought to be vigilant on their prices and quality. If the other companies’ quality and prices are much better, then JGJ might not succeed in the market. Thus, it must overdo substitute companies.
The last force is rivalry among current players. If JGJ is to overtake other companies, it must compete in several ways. Such ways include advertising, improving quality, price competition among others. This way, it will gain a competitive advantage in the housing industry.
References
Cox, A. W. (2002). Supply chains, markets, and power: Mapping buyer and supplier power regimes. Psychology Press.
Porter, M. E. (1980). Industry structure and competitive strategy: Keys to profitability. Financial Analysts Journal, 36(4), 30-41. https://doi.org/10.2469/faj.v36.n4.30