The Porters Five Forces Model Business Essay


Identify and assess the external environment factors in relation to political, market, statutory and regulatory requirements for business strategy formulation and business operations.

Political: - political factors are most effective on business. For example: - recently in New Zealand big issue going on minimum living wages between different politic parties. Some of them wants to increase minimum living wages rates from 13.50 to 18.00 NZD but if they will do that than its going to effects on business. Business owners will start to cut their jobs in order to save money. That will leads to big crises of unemployment. Also lot of people will avoid starting up new business because of high employment costs.

Market: - market is also main factor too. However business should know what kind of trend is going on in market now and they have reacted or make their future strategies accordingly that trend which leads business in to success. Perhaps it could lead it to bottom place or crisis. Like If they couldn't provide or take good actions accordingly market trends than they might lose their business.

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Statutory and regulatory requirements: - business has to follow whether countries and cities regulatory requirements if they will fail to achieve those requirements they might get fines or lost their retail license which is not good for business. Also they keep changing their regulatory requirements accordingly though businesses owners have to get change their things too. And that is cost money to business owners. This is scares lot of people who trying to open up their new business.


Identify and assess the implications of the factors identified for the nature and purpose of operations and the competitive situation of the organisations.

Political: - change in national policies or laws by politicians can create competitive environments for organisations. However sometimes politicians find out that in some field hardly 1-2 organisations doing business (ex .telecommunication industry). Because of high cost of investments or high risk but government starts to provide help them by changing their laws and policies for whoever wants to fall in such industry. That brings more competitors in industries and create competitive environment in industry.

Marketing: - marketing policies also create competitive environments for business. However nowadays companies promoting and marketing about their products and services in different ways. So their competitors have to do more promotions and marketing if they want to do well in market. But more marketing and more promotions require more money but on the other hand their market size is still same. But all this promotions and marketing cost became extra expenses for companies.


Identifies and assesses the implications of the factors identified for financial resources, responsibilities, accountabilities and controls of the operations.

Financial resources: - financial resources is like back bone of business. It provides financial support to business when they needed it. We can counts banks, credit unions, business partners, share holders and insurance companies in financial resources. They are providing loans and properties on rents for business.

Responsibilities: - responsibility is most important term in the business organisations. Because there is always lot of people are working in business or connected to business. For examples employees, stack holders and bosses. Everybody has their own responsibility according to their jobs in business. It is connected with other people in business. When one person will failed to fulfil his responsibility than it will effect on other people in the organisation too. Everybody in organisation or in business is connected with each other. For example: - business managers have to take responsibility of all actions done in their supervise in the business.

Accountabilities and controls of the operations: - accountabilities and controls of the operations its two different terms describe whole business operations. Accountabilities are shows financial situation of organisation. However it's mean from where an organisation gets its finances and finance resources. Control of the operation describes how all jobs getting done by employees in the organisation. From bottom level to top level management comes in control of operations.


Identifies and assesses the technical and information requirements and the impact on operations for the business operations.

 Technology is very useful thing in the business. It makes jobs easy and simple for employees in the organisation. For example: - till machines in retail stores they are keeping accurate record of sell and we can store data in them also help us out to run regular tasks in the business. Information is also requiring in business. We have got to know about market trend also our competitors behaviour in the industry. For example: - if we have accurate information about market trend and competitors moves and strategies. We can set our future planning and strategies on the basis of that information. And that lead us to successful position.

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Identifies and assesses the factors in terms of their implications for the capability of organisation to identify, assess and respond to changes in the internal and external environment.

Internal environment:-

Lake of staff: - to run successful business we have to have good qualified and hardworking staff. It is so important to have well trained and good experience staff in organisation but when we lacking to having such good staff that lead us to less production. For example:- when old well trained staff left the organisation we have to get somebody new to fill his gap in organisation. But it takes some time for new guy to perform such task as good as the old one being doing that task also we have to provide and extra guy in order to give him training. This cost lot of money to organisation also less production.

External environment:-

Bad Weather: - Bad weather is also big threat for business. For example: if we are running transport business. Our job is to transport raw materials and goods to big organisation or small business. But suddenly weather turnouts bad and we had heavy rainfall which jams the ways and roads for transportation. So due to such bad weather we couldn't do our job probably. That leads us in loss.


Describe the constraints on the ability of the organisation to respond to external factors in terms of current management theory.

Less storage: - sometimes less storage let company down. When we are running well successful business than we have to be well organised about storage of manufacture products, raw material, and goods. Because sometimes due to bad weather or something other reasons our distributers couldn't delivered us our order. If they will have good storage for that goods and we stored good quantity of that materials than we might survive in a days like this.

Finance: - sometimes organisations couldn't perform well because of less finance. It is necessary to have good finance support for organisation. But even though some organisation comes under big finance crisis and lost its name in market or in some case whole organisations sold out or stop working. So in order to avoid such condition business should do good management of finance.

Element 2


Identify and describe at least 2 models used for describing organisational- environment interface in terms of their possible application in business organisations.

Population ecology model

Population ecology model works based on conditions in the environment and explains us why some organisations survive and other fail. According to population ecology framework, luck, chance, and randomness play an important role in explaining the survival or failure of an organization.

It is similar to the way biologists have accounted for the survival or failure of animal and plant species throughout time. New organizations are continually being formed by entrepreneurs with a new idea for a product or service. 

Theorists of the population ecology perspective argue that survival or success is more dependent on luck or chance than on the quality of the idea. Many new products and services are offered in the marketplace, but it may take a chance discovery by another person or organization to see their usefulness. The implication of this perspective is that managerial abilities and talents in the initial stages of organizational development have very little to do with organizational success. Rather, success is more dependent on the environment and the various changes that are going on in the environment. As such, the perspective offers important insight into the relationships of organizations to a changing environment and how organizations either adapt to that change or experience failure. Hence, population ecologists would be in agreement with the old adage that success can be largely attributed to "being in the right place at the right time."This model shows that effect of population on business. (Hahn, 2005)

Resource dependent model: - resource dependent model is a model shows how external resource can affect the organisation. As we all know there is no business in New Zealand, can survive without outsourcing product and services.

To justify my word, let's take an example of an ordinary book shop. They never produce book them self but they order them from different suppliers and resource. So these both (book shop and supplier) are dependent of each other.

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Identify and describe at least 3 models used for analysing environment factors in terms of their process and application in business organisation.


SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face.

Used in a business context, a SWOT Analysis helps you carve a sustainable niche in your market. Used in a personal context, it helps you develop your career in a way that takes best advantage of your talents, abilities and opportunities.

What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well placed to exploit. And by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares.

More than this, by looking at yourself and your competitors using the SWOT framework, you can start to craft a strategy that helps you distinguish yourself from your competitors, so that you can compete successfully in your market.


Changes in your business environment can create great opportunities for your organization - and cause significant threats.

For example, opportunities can come from new technologies that help you reach new customers, from new funding streams that allow you to invest in better equipment, and from changed government policies that open up new markets.

Threats can include deregulation that exposes you to intensified competition; a shrinking market; or increases to interest rates, which can cause problems if your company is burdened by debt.

PEST Analysis is a simple and widely used tool that helps you analyze the Political, Economic, Socio-Cultural, and Technological changes in your business environment. This helps you understand the "big picture" forces of change that you're exposed to, and, from this, take advantage of the opportunities that they present.

In this article, we'll look at how you can use PEST Analysis to understand and adapt to your future business environment.

Porter's five forces model

The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.

With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit.

Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.

Element 3

Identify and analyse the strategies for responding to the impact of environmental factors in terms of their effectiveness in relation to business strategy formulation and business operations.

External environment factor: - political factor is one of external environment factor which effect business daily. In New Zealand some of political parties trying to increase minimum living wages to 2 NZD. On the other hand economy of New Zealand is not much stronger. Yes they can increase wages but on the other hand they have to reduce taxes from business so business owners can afford this pay rise.

Internal environment factors: - lack of staff is one of biggest internal environment factor which is affecting small business at the moment in New Zealand. People start to do work for one business and after sometimes as they gain some experience they will get the new job for little much higher pay. So in order to avoid such conditions business owners should do contracts with their employees so they cannot leave their job with them until their contract finished.