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1.0 INTRODUCTION
In todays dynamic and competitive business environment, survival, growth and
profitability are the essence goals of all industries. Nowadays, Porters Five Forces model is
currently being adopted as the powerful management tool of choice by many
organizations. The essence of this model is that it can help senior managers to make right
decision and build and sustain competitive advantages in the organization level. This
document presents the overview approach of Porters five forces framework across
organizations. And critically evaluation of porters five forces model mainly focused on
identifying the benefits and limitations of it and exploring some perceived issues or
problems regarding implementation. Finally the analysis of the five competitive forces of
Orange Juice From Concentrate industry in KSA is concluded in the last section of this
document.
2.0 MICHAEL PORTERS FIVE FORCES
2.1 Porters Five Forces Model
The economic structure of an industry is not an accident. Its complexities are the result of
long-term social trends and economic forces. But its effects on business managers are
immediate because it determines the competitive rules and strategies managers are likely
to use. Michael Porter has identified five forces that are widely used to assess the structure
and competition of any industry (Anonymous. Module MN 7037/D. Strategic Marketing
Management). Fig 1 summarizes Porters five forces:
Figure 1 Porters five forces source: Module MN 7037/D. Strategic Marketing Management
Together, the strength of the five forces determines the profit potential in an industry by
influencing the prices, costs, and required investments of businessesXthe elements of
return on investment. Stronger forces are associated with a more challenging business
environment (Backer, Michael. J. Marketing Strategy & Management).
2.1.1 Power of Suppliers
Any business requires inputsXlabour, parts, raw materials, and services. The cost of
companys inputs can have a significant effect on its profitability. Whether the strength of
suppliers represents a weak or a strong force hinges on the amount of bargaining power
they can exert and, ultimately, on how they can influence the terms and conditions of
transactions in their favour. Suppliers would prefer to sell to customers at the highest price
possible or provide customers with no more services than necessary. If the force is weak,
then customers may be able to negotiate a favourable business deal for themselves.
Conversely, if the force is strong, then customers are in a weak position and may have to
pay a higher price or accept a lower level of quality or service (Porter, Michael E.,
