Porter’s Value Chain – the Five Force Model & Four P’s

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When a marketer applies Porter’s value chain model to express relationship-marketing, the data may contain information on a company’s intangibles and elements of Porter’s Five Force Model. If applied appropriately, a company can utilize Porter’s models to create a competitive advantage. A primary external factor for any company’s survival and profitability is leveraged in customer relations and competitive advantage. A second factor is a company’s resources, i.e., human capital; innovative capital, financial structure; and customer capital. Internal intangible factors may include features such as information and information gaps; such gaps may stem from measuring marketing challenges (Gunther, Beyer, & Menninger, 2005).

Porter’s Five Force Model addresses a number of competitive issues. The model is positioned to examine competition within industries and generates attention on the competitor’s strengths, weaknesses, opportunities, and threats. Throughout the examination, the four P’s of marketing should be considered: product, price, place, and promotion (Gold, Godsey, & Cernusca, 2005). Additionally, during a competitive market investigation, the researcher’s review may include insight on the barriers to entry; the bargaining power of retailers; the bargaining power of buyers; what is and is not a substitute product or service; and where and what is the rivalry among existing product related companies.

Simply put, to pay for market information and analysis of the competitive forces, a firm may consider outsourcing the market research requirements to a credible marketing firm. I believe the question resides in what kind and level of competitive market information will an organization pay for. If I were to lean in the direction of Porter’s Five Forces Model, I would select a framework that addresses barriers and threats to new entrants and rivalry among existing firms. Thus, as Gold, Godsey, and Cernusca (2005) suggested: “most of the information regarding barriers to entry came from analysis of qualitative responses from phone survey. Major barriers to entry perceived by respondents included capital requirements, lack of knowledge and experience, access to inputs, and access to markets, labor intensity, and economies of scale”. In a study performed by Gold, et al (2005), they discovered that 68% of respondents; that included new competitors and existing competitors, had no strategic plan or reactive measures to minimize the effects of new companies entering their market. In essence, the respondent’s only strategy was to continue producing their products, remain steadfast on product quality, and provide good customer service.

Having and owning a strategic marketing plan is critical for penetration, growth, and value added. The aforementioned factors, if articulated and followed appropriately, can provide credible information and opportunity to marketers – and the firms. Assuming, the marketer has legitimate power and authority, the Four P’s and associated elements can be leveraged to mount and advance a competitive market growth environment.

Dr. Johnny D. Magwood
Northeast Utilities Service Company
V.P. Customer Experience & Chief Customer Officer; Northeast Utilities Service Company. J. D. Power Smart Grid Advisory Council; Chairman- Housing Authority Baltimore City; Next Generation Utilities Advisory Board; Utility Knowledge Customer Service Council; CS Advisory Council; Magistrate Judge Seletion Committee. Marketing Executive Council; Mechanical Engineer - The Johns Hopkins University; MBA - Loyola University of Maryland; DBA - University of Phoenix; Doctoral dissertation; Mergers and Acquisition: The Role of Corporate Executives' Relationships with Stakeholders

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