Assignment task:
Discussion topic: Industry sectors and companies' performance
Anthony's Post:
In 2024 the best performing industries were financial, utilities and information technologies all showing at least a .2% growth over the last year, some industries that were underperforming are industrials, energy and real estate (Bloomberg, 2024). It can be difficult to narrow down specifics in such large markets, but much success can often be directly attributed to Porter's Five Forces.
Industry performance is often affected by the Porter's five forces: Competitors, Potential Entrants, Buyers, Substitutes, and suppliers. Porter's five forces are an invaluable resource for businesses to grow and gain a competitive advantage by providing a holistic analysis, strategic insight, risk mitigation, opportunity identification, and long-term sustainability (Danao, 2024). Competitors: In any industry each business is competing directly against its like competitors. In some sectors a dominant company like Walmart is able to outsell its rivals due to their abilty to reduce their prices beyond a smaller company's acceptable margins. Suppliers: Most businesses select their supplier through a carefully crafted relationship that relies on dependability and cost-effectiveness. Extremely large companies such as Sams Club can create extremely favorable deals due to the massive amount of buying power that they have. Threat of Substitution: No business is above being outsold by an online company or alternative agency. The threat of substitution forces businesses to stay relevant by continuously pursuing innovation and new products. Threat of new entrants: We are in a world of startups who are finding their place in the market. Its easy for said startup to become mildly successful but it takes a great deal of planning, strategy, resources and luck for them to position themselves amongst the giants of the industry.
Performing under the COVID 19 Pandemic proved to be difficult at first but several industries were able to adapt and do well. The first issue that the pandemic exposed was the complete failure of supply chains. Many of the industries were relying on single suppliers and when that supplier stopped providing the supplies it forced the business to either create a substitution or place a hold on the product. The most recognizable shortage was personal protective equipment (PPE) and computer chips.
The immediate spike in demand for PPE created a mass buyout of the stockpile across the globe. Once the demand surpassed the ability for the factories to replace the stockpile it forced alternative solutions to be created IE homemade cloth masks. Looking at the chip shortage there was an extremely small number of factories that created computer processing chips for everything from computers to phones to cars. Over a very few months vehicles stopped rolling out of the factories and the showroom floors became empty. Due to the lack of the needed chips, we witnessed a large increase in demand for used vehicles. In 3 months, my personal vehicle rose in value by over 30%.
To make industries more resilient they have begun to diversify their supply chain to gain their needed materials from multiple suppliers. Although this is not the cheapest way to gain supplies the additional cost of multiple suppliers creates a buffer in the impact from any single supplier experiencing an issue.
References
Bloomberg. (2024, 08 14). Sector Performance. Retrieved from Bloomberg.
Danao, M. (2024, 02 12). Porter's Five Forces: Definition & How To Use The Model. Retrieved from Forbes Advisor.
Autumn's Post:
What industries tend to be better performers? Why (what factors contributed to their success)? How do they perform under crises like pandemics? What makes industries more resilient?
It is essential to understand that there is a difference between industry performance and company performance. Any industry willing to change with the times will be in business for the long term. Pharmaceuticals are an example of a high-performing sector. Porter's five forces are a powerful tool for identifying the primary sources of competition in an industry. Determining the competitive pressure within an industry allows one to determine how much of the market is available for growth. A saturated sector will not do as well as a less saturated industry. The five forces are competitive rivalry, supplier power, buyer power, threat of substitution, and threat of new entry. (Porter's Five Forces - the Framework Explained, n.d. )
Competitive Rivalry examines the number and strength of your competitors. How many others are in the industry doing the same thing? What products do they have, and how do they compare to yours? Highly saturated sectors will need to bring something others are not getting or will need a better price. (Porter's Five Forces - the Framework Explained, n.d. )
Supplier power can determine pricing for your product. Suppose there are not many suppliers who provide what a company needs. In that case, that company gives the supplier power to determine the pricing and quality of the supplies that they provide. Having more suppliers will allow more options for working on different contracts on pricing and quality. (Porter's Five Forces - the Framework Explained, n.d. )
Buyer power occurs when the number of buyers is low compared to the number of suppliers. This means that buyers might find it easier to switch to a low-priced competitor. The more buyers, the less power they will have. (Porter's Five Forces - the Framework Explained, n.d. )
The threat of substitution is customers finding a different way of doing what a company does. When customers can easily switch to another product or if another product comes out that is better and more desirable, that is the threat of substitution. (Porter's Five Forces - the Framework Explained, n.d. )
The threat of new entry occurs when a new rival enters the market. Other companies quickly figure out technologies and ideas that can pose a threat. This can cause organizations to change pricing and find ways to increase their market share if the rival is gaining traction. (Porter's Five Forces - the Framework Explained, n.d. )
Looking at successful organizations around the pandemic, it is clear that companies could stay open. Healthcare had to shut down clinics and do telemedicine, which was not ideal, but the government could change billing practices so that it didn't affect those organizations as much. Hospitals stayed open and expected overflow patients due to sick patients. The pharmaceutical industry was also doing very well. If there was anything that could provide a COVID test or a vaccine, then they were making record sales. Unfortunately, many companies didn't survive the pandemic. Restaurants and smaller stores that couldn't serve customers. Larger organizations could keep going but had to furlough employees until things could return to an open status.
Companies have to be open to change and willing to look at different revenue options to continue growing. Not being able to adapt to new ideas and programs will limit smaller companies as they grow.