1. You have landed your dream job working for Steve Evert. Unfortunately, Steve does not understand Porter's Five Forces Model. Using an example of your choice, explain to Steve the five forces in the model. 2. Steve also does not understand why you can only choose one of the Porter's generic strategies to follow. Explain to Steve why it would be difficult to operate in more than one area of Porter's generic strategies. 3. Only members of Costco can purchase products at Costco. Which of Porter's Five Forces did Costco address through the introduction of its members-only program?

Consider the following explanation

Explanation:

Answer 1:

Porter's Five Forces model acts as a powerful tool in order to understand the competitiveness of its business environment and determine its potential strategies. I will explain to Steve the five forces in the model by taking example of Whole Foods Inc. Following is the five force analysis of Whole Foods Inc.:

Competitive rivalry: This factor deals with the effects of firms on each other. Being in retail stores of grocery and health food store business; Whole Foods Inc. It faces aggressive competition with other retailers for price, service, quality and other variables. Low switching costs also acts as factor that competitors use. In order to overcome this external factor Whole Foods Inc. uses the tool of providing high quality products.

Bargaining Power of Buyers of Whole Foods Inc.: This factor deals with effect of buyers on businesses. Factors that contribute to the strong bargaining power of customers in case of Whole Foods Inc. Are: Low switching costs, Small volume of purchases and High quality of information. Whole Foods Inc. addresses consumer concerns by implementing Porter's Five Forces model and identifies new policies for product quality.

Bargaining Power of Suppliers of Whole Foods Inc.: Suppliers bargaining power has moderate impact on Whole Foods Inc. local, regional and national wholesalers and producers in the U. S. and overseas are the suppliers for Whole Foods Inc. To limit this external force Whole Foods Markets expands its supply chain, this in turn dilutes the suppliers bargaining power.

Threat of Substitutes: This external force of Michael Porter's Five Forces model has a strong impact on the business of Whole Foods Inc. The factors that contribute to this force are: Low cost of substitutes, low switching cost and High availability of substitute products. To overcome these factors Whole Foods Inc. Uses two strategies. First; they occasionally offer discounts in order to attract customers, and Second; by providing high quality products.

Threat of New Entrants: It also acts as a strong external force for Whole Foods Inc. Even small retailers acts as a potent competition for Whole Foods Inc. New entrants also stand high chances of success. To address this part of the Five Forces analysis model Whole Foods Inc. Stresses on high quality of products they offer to their customers.

Answer 2:

It would be difficult to operate in more than one area of Porter's generic strategies because if we try to achieve advantage on all generic strategies, we might get stuck in the middle and not achieve success even in a single strategy. Suppose, if a firm tries to achieve the strategy of supplying extremely good quality products, than it might risk its cost leadership strategy.

Therefore, it is possible for a firm to choose only one of the Porter's generic strategies to follow.