Porter’s Five Forces and Pest Analysis
Porter’s five-force tool is a very strong and important tool for assessing the Balance of Power in a Business Situation. The tool is very useful tool during business planning process since it helps determine the current returns from a business products and the potential income from any products the company is planning to start producing and selling.
Therefore, the product helps in determining the attractiveness and productivity of the business. (Mind Tools, 2009)
The forces and any potential sources for the data that can be used for supporting a PEST analysis:
• Supplier Power – The ability for suppliers to raise the prices of inputs they supply. The data that can be used for the analysis includes number of suppliers for the inputs, cost of switching from one product to another
• Buyer Power – The ability of buyers to influence the prices of the products they buy. The data for the analysis would be the number of buyers, and cost to the buyers of switching from one product to another.
• Competitive Rivalry – The number of competitors dealing with the same product and selling products of almost equally or more attractive value and quality as you are offering.
The data required for the analysis
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• Threat of Substitution – The threat of a seller losing his customers to other competing sellers. In this situation, the customers find a better offer from competing sellers and end up substituting his products with theirs. Data for the analysis would include number of competitors and viable substitution products.
• Threat of new entry – The ability of potential competitors finding entry into the market place and bringing in unfair or limiting competition that may bring the business down. Read Royal Dutch Shell PESTLE analysis
A website was chosen that would enable one to easily determined the NAICS codes for the target business for which the 5-Forces and PEST Analysis was to be carried out. The appropriate website was the NAICS Association website found on the link http://www. naics. com/search. htm. The website was very efficient since it allowed free determination of the codes as well as having a wide area of coverage. Data for the business for which the study was to be carried would be obtained from a wide range of websites.
Some of the websites were obtained as follows:
The World Bank website http://data. worldbank. org/ The website provided a massive amount of data from different fields. The data was very reliable and up-to-date and was usually collected from different first-hand sources. The data from this website was hence very useful for the analysis. ? The Vital Statistics online website http://rds. yahoo. com/_ylt=A0geupQfBWBM4QAAYlNXNyoA;_ylu=X3oDMTEzOG85bTE0BHNlYwNzcgRwb3MDNQRjb2xvA2FjMgR2dGlkA0Y4MjJfMTA3/SIG=12cq76v4g/EXP=1281447583/**http%3a//www.
cdc. gov/nchs/data_access/Vitalstatsonline. htm The data from this website was for very many fields of study and was hence very helpful for the analysis. However, the data did not cover all the fields that could be of interest and could sometimes have some data that is not updated. ? The IMF website. http://rds. yahoo. com/_ylt=A0oG72QmBmBMqBUAeLtXNyoA;_ylu=X3oDMTEzN2c2MjVxBHNlYwNzcgRwb3MDMQRjb2xvA2FjMgR2dGlkA0Y4MjJfMTA3/SIG=11osvase5/EXP=1281447846/**http%3a//www. imf. org/external/data.
htm The website contains data that is updated and from different fields of study, especially from the business field. The data is very reliable and usually updated. However, the data may be too massive for one to identify a specific field that is required for PEST analysis. References Mind Tools (2009). Porter’s Five Forces: Assesssing the Balance of Power in a BusinessSituation. Accessed from the internet on August 8, 2010. http://www. mindtools. com/pages/articles/newTMC_08. htm