Porter's 5 forces connected with SWOT

Business School Coursework

Assignment Title

       The SWOT analysis features regularly in the literature of Strategic Management. It covers both the internal and external environments of the organisation. Discuss how Porter’s 5 Force model might contribute to a SWOT analysis. 

        NB:        It will NOT be sufficient to simply describe SWOT and the Porter model.

        Your assignment should include examples to illustrate/emphasise points you are making.

Your work should be fully and consistently referenced.

To be completed in approximately 2500 words.

Assessment criteria for Coursework:

• This assignment mainly tests learning outcomes 1, 3 and 4
• Any diagrams etc  may be appended and will not be included in the word count

NB.

• A good answer will demonstrate a wide range of reading around the subject/topic (including some from other modules where appropriate).
• A good answer will incorporate relevant examples which clearly demonstrate the point(s) being made.
• A good answer will demonstrate understanding of the concepts of ‘SWOT’ and Porter’s 5 Force model as applied to organisations.
• A good answer will embrace associated concepts and theories and demonstrate clearly the links between such concepts.

Your work should be fully, properly and consistently referenced.  The assignment is to be completed in approximately 2500 words.

NB. A module is not successfully completed UNLESS the assessment criteria have been met.

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1. Introduction: 

In order to increase their performances, business professionals often use strategic planning frameworks such as a SWOT (summary of an analysis giving the Strength, Weakness, Opportunities and Threat of a company) or a five forces analysis in strategic planning initiatives. 

A SWOT analysis can be used to analyse the company's internal and external environment. With it, companies can assess their strengths, weaknesses, opportunities and threats with their competitors.

Porter’s five force analysis is a model which analyses and describes the competitive environment of an industry in terms of five basic competitive forces. The model has been designed as a means for organizations to understand their competition and figure strategy. In order to meet competitive advantage, companies have to identify external threats and opportunities. 

These frameworks help organizations think about the types of questions they need to ask and the information they need to think about before making any business decisions. SWOT and Michael Porter's Five Forces analysis model are both useful tools in strategic planning. 

But none of them is perfect, and even if they both help in assessing a company's strengths and weaknesses on industry opportunities and challenges, there are primary difference between them. Each of them offer information that the other doesn’t.

Based on this statement, we can wonder if they would be more useful combined. In this essay, we are going to discuss how Porter’s 5 Force model might contribute to a SWOT analysis. To do so, we will present each force of Porter’s 5 Force model and show how it can add complements to the SWOT analysis.

1. Bargaining of Buyers

The second force in Porter’s 5 force model is the bargaining of buyers. As most important stakeholder, a buyer influence determines the profit which can be extracted from a product while meeting price and quality demands. The presence of a small number of large volume buyers increases the price and service sensitivity and can cause troubles to a company because in this case, the buyers have a huge bargaining power. This power is a threat for the company and so a SWOT’s weakness. The buyers have lots of power. Where quality and added value are unimportant, the buyer will opt for the cheapest alternative. Another threat is that in an industry low switching costs will counteract brand loyalty and increase the importance of price or added value. Also, for industries who have realized a vertical integration, there is a threat of 'backward integration' if the buyer has the capability to make the product themselves then it will also restrict profitability. As a vertical integration means that you control all the value chain, the buyers have a direct impact on all the chain if they stop buying and then it becomes a real problem. As so, this is a threat for some companies and it becomes a SWOT’s weakness. 

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