This research paper presents five forces analysis of Dell Inc to analyze major factors and competitive elements and to assess how successful and effective is the company. The five force analysis, introduced by Michael Porter, can be used as a tool to measure the competitive rivalry and to assess whether the company has achieved sustainable competitive advantages or not.
The five force Model
The modern economy and international business environments have recently been largely influenced by various critical factors including globalization, fierce competition and advanced technology etc and therefore, as Michael Porter argued, business strategy equates to how a firm competes with other firms in the industry. According to his findings, strategy is not just a series of models and methods at corporate level, but rather it includes analyzing potential entrants, suppliers, buyers, substitutes and competitors (Stahl and Grigsby, 1997, p. 145). The five forces model has widely been applied as an important functional area of management and business academics. Almost all managers and large companies depend on porter’s five force analysis to find their marketing strengths and competitive advantages.
Harvard professor Michael E. Porter has developed Five Force model in 1980s to help companies identify what specific forces determine the profits in an industry. Any particular firm in an industry faces various forces within the industry affecting the profitability significantly. Some of such determining factors are competitive rivalry, potential entrants, threat of substitutes, bargaining power of buyers as well as suppliers. If a business is able to understand and analyze all these factors, then it would also be able to develop a business-level strategy to allow business either to take advantage or protect the business from these forces (Ahlstrom and Bruton, 2009, p. 131). Porter argued that each of the five forces determines how the firm would be able to perform in its marketing landscape. The stronger each of these forces is, the more limited is the ability of well-established companies to increase prices and earn greater amounts of profits. Competition rivalry, substitutes, potential entrants, power of suppliers and buyers thus directly impact the profitability as well as effective and smooth functioning of the business (Hill and Jones, 2007, p. 45). The five factors can greatly influence various aspects of the strategies of a company. for instance, if consumers of the company have considerable bargaining power, it will largely impact the business strategy of that company. Similarly, if more number of suppliers are available and there is increased possibility of getting better supplies for comparatively cheaper amounts, the company will be more likely to achieve relatively better competitive advantage as well (Kurtz, MacKenzie and Snow, 2009, p. 57). Competitive rivalry is one of the five forces and is influenced by the other four forces. A company that operates in a market where there are larger numbers of substitutes, more powerful buyers and suppliers and there are chances for new entrants faces relatively more severe competition. A company would be able to flourish if it is able to fence off new entrants and substitutes. Dell Inc: Company Profile For several