Discuss the five key forces to consider when analyzing an industry. How do these forces impact the balanced scorecard?
Analysis of an industry or market oftenly entails an exploration of the weaknesses, profitability the attractiveness and the intensity of competition in the industry. The Porter's Five Forces Model is oftenly used for the analysis of the above-mentioned factors. The Balanced Scorecard, on the other hand, takes into consideration the learning measures, the customer and learning measures in addition to the financial measures. The balanced scorecard is a performance measurement tool used to pinpoint and improve the various aspects of internal business functions. This paper focuses on Porter's five key forces which are used in the analysis of industry as well as the impact of the forces on the balanced scorecard.
Competition in the industry
The factor estimates the ability of a company to survive in the industry in relation to the number of competitors. Notably, a large number of competitors dealing with similar products and services tends to lessen the power of a company (Takata, 2016). Similarly, when the competitive intensity in an industry is less, accompany tend to hold more power to achieve profitability and sales. The financial measures of performance include income ratios, financial ratios as well as the budget variances (Carraher, 2018). In an effort to gain a competitive advantage in the industry, the balanced scorecard is used to analyze how well information is harnessed and utilized by the employees.
New Entrants Potential in the Industry
The power of a company is often affected by the entrants of new players in the industry. A company's position is weakened when the less time and resources are needed for a new entrant into the industry to become an effective competitor. An industry is considered attractive when strong barriers to entry exist.
Power of suppliers
The force addressed the ability of the supplier to affect the price of goods and services. A fewer number of suppliers in the industry, as well as the higher level of dependency of a company to the supplier, tends to increase the power of a supplier. The power held by the supplier is also reflected in the ability of a company to switch from one supplier to another. Additionally, the balanced scorecard is used to evaluate the business process by investigating how well products are being manufactured in a bid to manage wastes, shortages, bottlenecks and delays in supply (Hladchenko, 2015).
Power of the Customer
This force refers to the capability of a customer to impact on the prices of goods and services. The power of the consumer can be estimated from the number of customers that a company has, the significance of each customer and the cost to be incurred by the consumer in the process of switching from one company to another. More power is held by a smaller and powerful client base. In relation to the power held by the customer in the industry, the balanced scorecard system is used to gauge the quality of customer satisfaction through the analysis of their perspective. The customer feedback is therefore used to ascertain whether the customer needs are being met or not.
Threats of Substitutes customer
The position of a company in the industry is significantly affected by the ability of its goods and services to be substituted. A company that offers goods and services that can be substituted easily in the industry hold less power.
Carraher, S. (2018). An examination of an instrument to measure Porter’s Five Forces Model. . International Journal of Arts & Sciences Conference at Harvard University.
Hladchenko, M. (2015). Balanced Scorecard–a strategic management system of the higher education institution. International Journal of Educational Management, 29(2), 167 -176.
Takata, H. (2016). Effects of industry forces, market orientation, and marketing capabilities on business performance: An empirical analysis of Japanese manufacturers from 2009 to 2011. Journal of Business Research, 69(12), 5611-5619.
by EssayRoyal, Nov. 12, 2019, 4:37 p.m.