In this article, the author proposes the idea of applying
Michael Porter’s “Five Forces Model” to India’s singular business environment
in order to help a company develop a strategy and take a look at potential
profits.
The author begins by discussing
the first force, the threat of new competition.
When a business plans on entering a new market, it typically like for
those entry barriers to be low. In India, however, due to the government’s
reluctance to have new players enter the market. An example used was that of
India’s airline sector, which made it difficult for new competition to enter
the market because of their deregulation, would make it difficult for any new
competition to develop long-term strategies. India would more often resort to
these tactics “if the government
feels that new entrants are threatening its home market.” (Parthasarathy 32)
The second force is the bargaining power of suppliers. According to
the article, “the model assumes that they can exert significant influence over
a corporate customer.” (Parthasarathy 32) While this may be true in more
developed countries, in a country such as India, consumers are less concerned
about the quality of the product and more focused on the price. In comparison
with the third force, the bargaining power of buyers, this typically focuses on
the consumer being able to receive the lowest price possible. Although they can
be influential in determining the price, many lack the knowledge on a product’s
true cost and just take it as it because they need it.
The fourth force, the availability of substitute goods, deals with
finding the next best alternative. The author here states that in the less
developed countries, the consumer almost always tends to go for the cheaper
option. In order for a product to truly differentiate itself from similar
products the company must look into a different marketing strategy in order to
really catch the attention of the consumer, especially when their product isn’t
the cheapest on the market.
Competition within industries is the final force discussed in the
article. Two to three top players mainly dominate India. While this may also be
true for many other countries, the gap between the top players and second tier
competition is much wider and these companies just simply lack the resources
and experience to fully compete.
In conclusion, because there is a lack of competition at the top,
this affects how the first four forces apply. Entry barriers are low enough for
competition to enter the market but have no chance of growing due to the larger
companies that dominate the market.
Source:
Financial
Management (14719185); Jun2010, p32-33, 2p
To developed contries, the quality is really important, accompanied with the price as well. But normally, people tend to choose the better one with less warranty cost and time. To developing countries, there are still cheap labor out there that produces cheap price, but quality is not so good because of technology, training program, etc. For example, China is one of the biggest market of labor and products. Most of items are made in China. If you could spend some more time to study about the good quality product, there would be a huge question? Where do they get material and how do they do it? Not jumping to conclusion so fast, but most of Chinese products are not so good, people still race to get the cheap ones......
ReplyDeleteWhat I also believe is another factor in these developing countries is the income each household receives. Maybe it isn't as high so they must resort to the cheaper product even thought it is lower quality.
DeleteIt is so true....I was from a developing country. I know the whole fact about it. Compare between two countries, mine and this country, there is a huge gap.....You are so right about income....Our income is not enough to buy a meal for a family and that is how.....
DeleteIndia's economy is growing and the poverty levels are decreasing. However, as your post suggest their government often takes actions that actually slow growth down. If more private investment is continued to be allowed in India their economic status and possibly quality of life could improve. As incomes improve so will the possibilities for offering differentiated products at higher prices.
ReplyDelete