International Institute Of Planning & Management

International Institute of Planning & Management

Business Policy & Competitive Strategy Assignment: Porter’s Five Force Model

Submitted By:Rohit Dhaula Roll No. - 33 Batch: - FW 08/10 Gurgaon

Porter’s Five Forces Analysis For The Organization

The assignment consists of the Porters five force model which I have applied on the BBA group and in addition to it PEST analysis is also done to make it clearer. The BBA Group has been established in 1897 as a textile manufacturing industry. The Porter’s Model can be seen in the figure.

The Porter’s 5 forces analysis is a framework for industry analysis and business strategy development. Five forces - bargaining power of customers, the bargaining power of suppliers, the threat of new entrants, and the threat of substitute products -- combined with other variables to influence a fifth force, the level of competition in an industry. 2

Introduction Every business is subject to factors that affect the firm’s function as a whole. These factors are the ones attributed for the success or even the failure of a business. In the light of this, there are certain ways or techniques to be considered in order to emerge and continue to be competitive within the market place. The marketing concept has been defined as ‘the key to achieving organizational goals’ and the marketing concept rests on ‘market focus, customer orientation, coordinated marketing and profitability’. In a profit making business, the firm obviously has to try and achieve this level of customer satisfaction as a way of staying ahead of the competition and making a profit. Today, more and more people and organization are striving to be recognized in the business arena. With this objective, these organizations had been able to competently and effectively adapt to the situation in the market place by using generic strategies that enhanced their competitiveness. There are five different generic strategies that a business can choose. These include cost leadership, differentiation, focused cost leadership and integrated cost leadership/differentiation. Each generic strategy helps the company to establish and exploit a competitive advantage within a particular competitive scope. So, this assignment consists of the generic strategy, PEST analysis and Michael Porter five force model which has been used on BBA Group. Overview of the Company BBA Group has been established in 1897 as a textile manufacturing industry. At present, BBA groups operate in a global market in two distinctive areas of business. First the aviation service systems which consist of Aviation Services and BBA aviation systems, through its subsidiaries in Latin America, US and Europe. This division provides fuelling and refuelling services, cleaning, maintenance, aircraft sales, servicing, repair, technical support and training of pilots. Next, BBA develops specific material for different industrial and hygiene sectors. Herein, they provide non-fabric products by the mechanical interweavement of textile fibres for the manufacture of sanitary towels and babies nappies. This business division also specializes in embossing activities for printing original colour motifs like kitchen paper. BBA Group is publicly recognized company traded on UK stock exchange. The companies involved in such group focus on providing products and services to 3

aviation industries and speciality materials industries. The aviation services and systems groups serve regional airline, commercial and military aviation clients and world business aviation by it primary operating industries and their subsidiaries. Some of these industries are Signature Flight Support, International Turbine Service, Dallas Air motive and others. The aviation division of BBA is known to be the 5th largest aviation groups in UK and amongst the top 40 largest industries in the world market. Furthermore, BBA is also a vital player in the aviation support business. Such group has business operations at over 100 locations in the international market including 46 of the world’s top 100 airports. Part of the company’s business is joining mergers and acquisition. Such strategy helped the company to expand its business portfolio and expand their territories in the global market. Utilizing PEST Analysis In order to analyze the environmental aspects of BBA Group, PEST analysis will be used. PEST Stands for Political, Economic, Sociocultural and Technological factors. Political Sector A company will not be able to gain success, good reputation and trust if it will not consider legal and political sector as part of their strategy. BBA Group has been able to follow the principles of business ethics. Hence, the company considers legality in all their actions. They make sure that all their products and services adhere to the standards and wills satisfy their client worldwide. Economic Sector Economically, it can be said that throughout the years, BBA Group had enjoyed being at the top of its competitors. The economic status of BBA is highly remarkable that it always give its consumers the best and quality products and services in the two business divisions. In addition, the company’s growth and expansion on different countries in the world is an obvious evidence that BBA has been able to have a stable economic capacity to sustain and maintain its competitive position in the market place. Sociocultural Sector Culture is an important factor in understanding an industry, because for any organization to operate effectively, it must for some extent have a 4

general set of believe and assumptions on how culture will influence the productivity and the success or failure of any company. Culture environment is one of the important principles that influence the organization. There are four dimensions that differentiate cultures at a national level (power distance, individualism-collectivism, masculinity-femininity, uncertainty avoidance), which help to understand that people arrive to organizations with their own national culture. In the BBA, the management sees to it that they value the opinion of their employees no matter what is their nationality. Since, this company is competing globally; it cannot be denied that they need employees from different cultures to be in the company to help in the decision making. It is also indicated that the international managers has been able to create a positive relationship in the local managers. Moreover, the management of the company has seen to it that they would be fair in treating all their employees. In addition, as mentioned earlier, the company sees to it that their social commitment is being achieved by satisfying the consumers with their quality products and services in aviation and special material industries. Herein, the company values the consumer by knowing their demands and providing their demands and in aviation and special material products. The business division of BBA has been able to make the company more competitive. Technological Sector The complexities of achieving business success through increased efficiency, effectiveness and competitiveness, combined with innovative applications of modern technology, has heightened the awareness of both Technology and business managers towards more strategically oriented approaches for planning and management of any industry. BBA has been able to use technological advancement for creating new and innovative products and services needed by its customers may it be from the aviation or the special materials business. Part of this is their utilization of modern technology in producing new products that will meet the demands of their target market. They also use the purpose of information technology by creating their own website to let their consumers have an easy access of knowing the company and the products and services that the company has made for them. 5

Porter Five Force Model An industry is a group of firms that market its products closely substituted from each other. According to Porter (1980), some industries tend to become more profitable and competitive than the others. Hence, an existing industry such as the BBA Group based in UK should always remember that their industry will only survive by utilizing a strategy that would enhance the competitiveness of the business. In Porter’s model, it is assumed that there are five forces that particularly affect an industry. The model is useful if a manager strives to get the better off rivals. The framework provides excellent understanding of the industry context in which the firm operates. Porter’s Five Forces Model includes threat of entrance of new industries. The main objective of BBA is to stay in the competitive position in the global market Although, the company knew that this type of industry belongs to higher entry barriers, the management has been able utilize an approach to make sure that the company will still be competitive in the international level. In order for BBA to compete and stay in the international marketing environment, the management team had provided a long term vision to be followed by the industry as a whole. The use of merging and acquisitions has been able to strengthen the capability of the company to strongly and efficiently compete within the marketplace in both local and international arena. The agreement made by BBA with these leading industries has strengthened their capabilities to compete in the global arena in terms of producing quality products and service especially for their aviation systems. Moreover, with the existence of new entrants in this kind of business, the competition becomes tougher and tougher. Since, these new entrants can be a threat for the company in terms of substitute products, BBA have again utilizes a strategy that will enhance their product more. Product differentiation approach was implemented by the company as their marketing strategy. This is to ensure that with these new entrants their product will still be different, unique and full of quality to satisfy their target market. The bargaining power of a supplier could be a threat for the profit of the company, and BBA management is aware of it. Since the company’s goal is to provide the customers of their needs and expectations in terms of diamond production, the company has been able to utilize all its resources. In addition, BBA, also uses supply and distribution channel effectively. 6

Porter’s also include in his model the concept of the bargaining power of Buyers. Hence, BBA sees to it that their clients will be satisfied in their products with regards to aviation or special material products or service. According to the management of the company, the Argyle fundamental premise is a simple as achieving the core mission and objective by merely satisfying their customers and clients. And lastly, BBA also considers the intensity of rivalry. In this manner, they are willing to provide strategies and techniques in a way that their competitors will see them as a tough competitor for the benefit of the whole organization. Since the competition of these industries worldwide is very strong, BBA utilizes all their resources to enhance the operation of the BBA and to be recognized as the leading industry in diamond production. They also tried to include innovative marketing strategy and used technologically advanced equipments to produce quality diamond products. Conclusion Analysis shows that because of the management and marketing strategies of BBA Group, they are still enjoying their competitive position and competitive advantage in the global market. In addition, it also shows that part of the generic strategy of the company is product or service differentiation and joining into mergers and acquisitions. The company has been able to adapt to the marketing environment because of its strong commitment of providing quality products and services for both of their business operations.

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