Structural Analysis Of Porters Competitive Forces Business Essay


The five forces model by Michael Porter focuses on analyzing the key aspects that are essential for entering new marketplaces. He defines the industry as 'the group of firms producing products that are close substitutes for each other' (Porter, 1998). Prior to exploring any new marketplace and business line, it is essential that a profound structural analysis be performed. The forces that determines the ultimate potential and threats for competitions for an industry are

In the recent years Pakistan telecom industry has flourished by leaps and bounds and overall teledensity technology advancement and foreign direct investment are the indicators of growth of industry in Pakistan. With over USD 9 billion was invested by foreigners' alone (Rising Pakistan, 2007). Pakistan's total teledensity has reached 52% in 2007 which stands well above other regional economies, of which the fixed line teledensity is 2.9% and cellular 48.4%. Pakistan ranks among the most densely populated countries on the globe. Network coverage of almost 90% of the total population of the country has made telecom sector even more attractive for foreign investment. In 2007 the sector grew by 80% whereas average growth rate in last 4 years has been more than 100%. Today total users have reached 90 million (Dec 2009).

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The entry of new operators into the market has certainly helped to further boost the competitive environment.

Threat of New Entrants

Higher the competitor rivalry, the lower the industry will suffer from threats. The threat of new entries depends on the level of entry barriers in the country economy. Economies of Scale, Product Differentiation, Capital Requirements and Access to Distribution Channels are analysed.


In a study conducted by WorldBank Group-Doing Business 2009, it revealed that Pakistan globally ranks 85 as for ease of doing business.

Figure 1. 2- Doing Business 2009 (World Bank Group)

Competitive Rivalry

The analysis of competitive forces initiates with studying the rivalry. If threats of new entrants are low then it's likely to have high Competitive rivalry in industry. Following elements are studied while performing the competitor analysis.

Numerous or equally balanced competitors

Rate of Industry Growth

Product/Service Characteristics

Level of fixed Costs

High Exit Barriers


The telecommunication market consists of FIVE cellular services provider and has 78.74 million subscribers. The biggest competitor in market is MOBILINK Phone, who has 30.88 million subscribers, which makes approximately 40% of the market share.





(in millions)



Mobilink Jazz



Orascom (Egypt-based company)





PTCL Pakistan










Abu Dhabi



CDMA2000 1x




Table 1.1- Cellular Service Providers in Pakistan (Pakistan Telecommunication authority -2008)

Threat of Substitute Products

The related substitute products in the market increase the customers to switch to alternate option, as a result of poor services or increase in price.


The threat of consumer's adopting the substitute products is high. As there already exist 5 cellular services provider. A lower price strategy or high quality service can help in consumer base.

Bargaining Power of Buyers

Buyers and suppliers hold an important place in the market. The major buyer groups, united can bargain the prices or better quality.


The bargaining power of buyers is high, due to the high growth rate in the market. Mobile penetration was 40% (38 million mobile subscribers) by Feb 2008 (I.C.T, 2008)

Power of Suppliers

A supplier is in a powerful position if the supply industry is dominated by a few powerful companies. Key suppliers can raise prices or reduce quality. (Morrison, 2006)


The Bargaining power of the suppliers is low in the market as there are a lot of telecom related suppliers already available. Ufone and Telenor are already opertating in Pakistan.

The following table briefs the forces and their strength at a glance.



Competitive Rivalry


Threat of Entry


Threat of Substitution


Bargaining powers of Buyers


Bargaining power of Suppliers


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Table 1.2- Quick Glance at five forces

HR Implications

Pakistan labor cost in ICT sector is very low and the salary is USD 981.29 per month. (Doing business, 2009) .Pakistan has an edge of skilful labor because they are easily trainable and has the capability to learn quickly. There are 6,400 trade unions with 1.9 million members in Pakistan. (CIA World Fact Book 2008). IT institutes are producing around 2000 ICT related graduates. Also a huge number of non-IT graduates are also working in this field. The current students are more jumping into ICT related study as the telecom and IT industry is rapidly growing (Business opportunities within the IT and telecommunication industry Bangladesh 2006, p3).

Human Resource professionals need to focus on the below given aspects in their practices.

Talent Acquisition strategy need to be designed to hire the competitive workforce

Competitive compensation plans should be designed to attract and retain the employees

Skill development for a highly competitive workforce

Performance Management

Succession Planning

Employee Retention



Porter, Michael E. 1998, on competition, Harvard Business Review Book Series,(USA).

Janet Morrison (2006) -The International Business Environment- Global & Local Marketplaces in a Changing World 2nd edition.

Govt. Publications

South Asia Trade & Investment Network (2008): Regional Trade in South Asia Towards Stronger Linkages and Growth: SAARC Chamber of Commerce

The International Bank for Reconstruction and Development / The World Bank (2008) Doing Business 2009- Country Profile for Pakistan, USA


The world Fact Book, The country information about Pakistan 2008

Geert Hofstedeâ„¢ Cultural Dimensions

The following cross-cultural analysis was performed, keeping in view the comparison between a developed and a developing country. For this, UK(Europe) and India(Asia) were chosen as topics of study. The cultures are way different from each other. Also India has opened its doors for liberalization. In recent past, a good number of UK corporations have established their operations in India.

The cultural studies done by Geert Hofstede (2001) are most widely used and best known on evaluating the cultural dimensions. Hofstede has identified 5 independent factors to analyze the cultural dimensions. These five dimensions are

Power Distance (PDI)

Individualism (IDV)

Masculinity (MAS)

Uncertainty Avoidance Index (UAI)

Long Term Orientation (LTO)

A cultural dimensions analysis was conducted on United Kingdom and India using the Geert Hofstede studies (Geert Hofstede Website).

Power Distance (PDI)

The findings reveal that India has High Power Distance Index (77), which indicates the fact that India still follow the traditional caste systems. The Govt. has made regulations to outlaw discrimination and biases however the large power distance score indicates that the attitudes still remain in practice. On the contrary, UK has low scores (35) in power index, which indicates that biasness, ethnicity, regional & national differences, inequalities are reasonably low. The UK legislations also protect the rights of minorities.

Organizational & HR perspective:

Within HR, the Power Distance dimension may influence the structure of the organisational hierarchy, such as the extent to which a company may adopt a mechanistic or organic structure. (Sandy: Session 5)

The High Power Index in India depicts that strict protocols and hierarchies are observed in Indian organizations. Whereas, the Low PDI at United Kingdom shows that organizational hierarchy do not observe strict protocols, also their relationship among employees is relatively casual. Indian managers tend to rely on the use of power in superior-subordinate relationships (Budhwar, 2000).

Individualism (IDV)

India has Low individualism (48), which shows that the society works more on the collectivism basis than focusing on individualism. UK scores 89 on Individualism index, which is relatively high. It indicates that the culture values individuality.

Organizational & HR perspective

This dimension may influence the degree to which team working is practices and the degree to which organisations may employ a paternalistic management style. (Sandy: Session 5)

Through an HR perspective, the high scores depicts that employees may be more concerned with their individual performances rather than be concerned working within the teams.

Masculinity (MAS)

India has an average level of Masculinity at 56, where UK scores 66 with average Masculinity. with the world average just slightly lower at 51.This shows the gap between values of men & women. It reflects that both of the societies and cultures (UK & India) aspires equality for both the sexes, yet the cultures still undergo a certain level of gender biasness.

Organizational & HR perspective

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Within HR, this dimension may influence the degree to which there is equality of opportunities amongst the two genders, the degree to which a company offers flexible working and the extent to which a company may implement work-life balance policies. (Sandy: Session 5)

Uncertainty Avoidance Index (UAI)

Being rated at 40, India ranks quite low in Uncertainty Avoidance (UAI) dimension, which is relatively close to UK with 35 scores. The lower ratings of both the nations explain that the cultures are innovative, seek and experiment on new ideas and situations. The societies are more willing to experiment the risk.

Organizational & HR perspective

Within HR, this dimension may influence for instance an organisation's openness to change and the degree of bureaucratisation in other words of rule making (Sandy: Session 5)

The low UAI index shows that the organization is open to change and willing to experience the risks and challenges. The formal procedures may or may not exist, but the organization does not follow any rigidity in their practices and procedures. The low uncertainty avoidance score in India indicates that they tend to easily accept that uncertainty is inherent in life and take each day as it comes. It is understandable to have such a behaviour in a country with a high rate of poverty (Budhwar, 2000).

Long Term Orientation (LTO)

The index for Long Term Orientation (LTO) for India is ranked at 61, where UK is ranked as 25.Higher scores show that . A higher LTO score can be indicative of a culture that embraces long-term devotion to traditional, forward thinking values. In this analysis, the ratings for Indian society have been found to be very high in contrast to UK, which does not seem to practice the concept of long-term, traditional orientation. UK is more likely to adopt the change in culture, as compared to Indian markets.

Organizational & HR perspective

Within HR, this dimension may influence the HR planning function of an organisation and the degree to which subjectivity and networking may influence recruitment and selection. (Sandy: Session 5)

International HRM

Morgan defined international HRM as the interplay among the three dimension- human resource activities, types of employees, and countries of operation. For international HRM, the HR department engages in a number of HR activities necessary to manage operation between domestic and international environment. Following are the elements that needs special attention by HRM professionals.

International Taxation

International Relocation & Orientation

Administrative services for expatriates

Host government relations

Language translation services

Lower level employees often feel uncomfortable with expatriate managers from moderate to lower power distance countries, who may attempt to establish more participative, egalitarian management practices (Vance,Paik)


Geert Hofstede - Cultural Dimensions (United Kingdom)



Geert Hofstede- Cultural Analysis [Online] Accessed at . [Accessed on 25th January, 2008]

Sandy (2008), Lecture Notes- Session 5: The Culture, Demographics & Social Environment

Charles M. Vance, Yongsun Paik (2000) Managing a Global Workforce

Pawan S. Budhwar (2000) Indian and, British personnel specialists' understanding of the dynamics of their function: an empirical study, International Business Review, Elsevier Science , UK

Impact of Technology on Jobs, Skills & Productivity

The study documents the impact of information technology taking place in businesses today. The latest statistics show that the Information Communication Technology sector represents over 5% of the EU GDP. This 5% drives 25% of overall growth and about 40% of our increase in productivity. Information and Communication Technology research and its impact on growth and job creation- Viviane Reding (2005). The penetration of ICT is leading the businesses to redesign their organizational functions. Technology has not only impacted the way business used to run, but has effected the jobs in great deal. These changes in the workplaces are requiring constant definition in job descriptions and new skills required to perform .

Change of Job Roles

The use of Information technology is playing a dual role and has relatively changed the job roles. On one hand, technology has replaced some jobs. A millworker might be replaced with robotics, but the plant will require people to design, operate and maintain the technology. And on the other the work methodology is changed. The tasks that were performed earlier through manual working have been replaced by modern ways of performing. The manual record and HR processes have been replaced through HRIS.

Loss of Traditional Skills

As a result of redesigned job roles, the penetration of technology and précised engineering is greatly involved in working dimensions. This has impacted in loss of manual work, ultimately resulting in loss of traditional skills. (E.g. carpet making, weaving, sewing etc.)

More female jobs created

Female full time employment has grown faster than male full time employment since the eighties, In a study conducted over 'The Impact of Technology and Trade on Job Creation and Job Destruction', the findings revealed that the higher the level of technology in an industry the greater the female job creation; and forth manufacturing sector, the higher the import penetration ratio the lower the female job creation. The result stated that the level of technology is positively associated with female job creation but negatively with male job creation (Junankar, 2000).

Creation of Work from Home Opportunities

Due to expansion of business, and elimination of geographical boundaries, new and enhanced ways of business have been introduced. ICT has played a vital role in this expansion. These changed and expansions have led to more work from home opportunities. The concepts of tele-working have been introduced.

Impact of Technology on Theoretical Frameworks

(Contingency Vs. Labour Process)

The two major theories that discuss the impact of technology are Contingency theory and Labour Process theory. These theories are discussed below.

Contingency Theory

According to contingency theory, technology is believed to determine work organisation. The nature of work people undertake, such as job design, and the systems of control they are subjected to by management, such as the number of managerial layers in the organisational hierarchy. (Lecture Notes: Session 4)

Labour Process Theory

The Labour Process theory defines that technology is a 'managerial control mechanism' and does not determine work organisation and managerial systems of control. Technology (Lecture Notes: Session 4)

Analysis & Conclusion

In early years, IT played its role by facilitating the existing practices in organizations. It was simply used a medium to execute the existing organizational structures. But with the changing demographics, the impact increased from simply being operational to strategic part. Ultimately, the usage of ICT resulted businesses much more than it appear on the surface, and is continually changing the day to day practices. With the use of Business to Business (B2B) and Business to consumer(B2C) concepts, it has dramatically changed the retail and whole sale business.

IT Implications on Business Functions

Few of the IT implication in modern business practices are given below.

Business Function


Recruitment &Selection

Online job portals

Training &Development

E-Learning, Online Journals, Access to online libraries

Retail Industry

Online buying &selling of goods. Business to Consumer-B2C (E.g E-Bay, Amazon, All retail stores)

Whole Sale Industry

Business to Business buying and selling


E-marketing, Virtual Shops, websites, mail shots, e-newsletters

Groups &Teams

Virtual Teams, Online networking, groups, forums, Web Conferencing

Organizational Communication

Video Conferencing, Emails, Tele conferencing, fax, Intranets

Research &Analysis

Online databases,

Raw Material Sourcing

Business Portals, Online trade enquiries

Simple tools like e-mail have changed the way information is exchanged. Emails were once limited to be delivered to the PCs only. But with the technological advancements, e-mail now can be read through a cell phone. Online shopping and navigational tools have been provided on cellphones. Intranets have replaced the company newsletter. Internet database sites have made updating information such as inventory pricing a simple task, and finding a job or an employee online, has proved to be feasible solution.

Online services, including travel, banking & other financial services have expanded rapidly. A view of the given chart (Chart 1.1) explains that how online retail sales were done in Europe (Euro stat- 2004). Within EU, 19% of individuals used e-commerce to purchase goods and services in 2003.

1.1-Online Retail Sales in Europe (2004)

Source: Financial Times, 10 June 2004


Reading, V (2005): Information and Communication Technology Research and Its Impact on Growth and Job Creation. Communicating European Research Conference, Brussels

Junankar,R. (2000): The Impact of Technology and Trade on Job Creation and Job Destruction. Conference of Economists, Belgium

Sandy (2008), Lecture Notes- Session 4: The Technological Impact

EuroStat 2004: [Online] Accessed at,30070682,1090_33076576HYPERLINK ",30070682,1090_33076576&_dad=portal&_schema=PORTAL"&HYPERLINK ",30070682,1090_33076576&_dad=portal&_schema=PORTAL"_dad=portalHYPERLINK ",30070682,1090_33076576&_dad=portal&_schema=PORTAL"&HYPERLINK ",30070682,1090_33076576&_dad=portal&_schema=PORTAL"_schema=PORTAL, [Accessed January 12, 2009]

Stakeholder Analysis

Stakeholders are individuals and/or groups who are affected by or affect the performance of the organization in which they have an interest. Typically they would include employees, managers, creditors, suppliers, shareholders and society at large. (Worthington, Britton- 2006). These stakeholders may be winners or losers, included or excluded from decision-making and could be inside or outside the organization.

The stakeholder approach starts by looking at various groups to which the corporation has a responsibility to. The main starting point is the claim that corporations are not simply managed in the interests of their shareholders alone but there are a whole range of groups, or stakeholders, that have a legitimate interest in the corporation as well.

There are two types of stakeholder groups

Primary Stakeholder Group

Secondary Stakeholder Group

Primary Stakeholder Group

A primary stakeholder group is one whose continuous participation is critical to the company's survival and success. Primary stakeholder groups typically are comprised of shareholders and investors, employees, customers and suppliers, together with what is defined as the public stakeholder group that includes the governments and the communities, which provide infrastructures and markets, whose laws and regulations must be obeyed and to whom taxes and other obligations may be due. (Lecture Notes: Session 8)

Secondary Stakeholder Group

Secondary stakeholder group are defined as those who influence or affect, or are influenced or affected by, the corporation, but are neither engaged in transactions with the corporation nor are essential for its survival. (Lecture Notes: Session 8)

Stakeholder Analysis

Stakeholder analysis is the identification of an organization/project's key stakeholders. It is used to analyze their interests with the initiative and identifies their power to which extent they can influence.

Key Stakeholders

A stakeholder analysis was conducted on the National Health Service. The National Health Service provides health care in the UK and is funded by taxation. Following are the key stakeholder of the organization (NHS website)


Department of Health

Office of Government Commerce

NHS supply staff

Suppliers and potential suppliers

Patients and their representatives

Voluntary Groups

Social Services

Emergency services



Stake Holder Analysis - Interest & Power Influence

The below given table show that there are around 10 key stakeholders in NHS. Each stakeholder's interest along with their extent power to influence the general business and HR decisions are given.



Extent of Power

(General Business Operations)

Influence on HR Decisions

Department of Health

Betterment &wellness of the people



Office of Government Commerce

Delivering best value from its spending



Voluntary Groups

Enhancing the life &health standards

Low - Medium


Social Services

Promoting protection and inclusion



NHS supply staff

Support for procurement of health services

Medium - High


Suppliers and potential suppliers

Generating profits, gaining more sales &profits



Patients and their representative

General Wellness



Emergency services

Providing protection to life

Medium - High



Providing protection to life. Financial Gain




Providing protection to life. Financial Gain



It is observed that most of the stake holders relatively share a common interest for better and wellness of people. The suppliers and potential suppliers have an interest of directly generating more sales and profits, and that's why they are associated with NHS. Whereas, most of the govt bodies, agencies, service providers are generally associated to NHS due to social causes.

The four major stakeholders that are quite influential in general business decisions are Department of Health, Office of Govt. Commerce and patient themselves. On the contrary, voluntary groups, suppliers and staff members have medium influence on business decision making. The GPs have been found to have the lowest influence in decision making. The reason is that most of the GPs work as consultants.

It is interesting to found that the stakeholders that have the highest influence in general decision making appears to have the lowest say in specific HR functions. The groups are more careful on strategic decision making of NHS, rather than HR functions. As they appear to play very low role in recruitment, hiring, performance management etc. Whereas, the highest rate of influence on HR decisions are by Staff and GPs, as they are the ones who directly get affected by any change in HR plans and policies.

Stakeholder Mapping

A stakeholder map is designed to visually analyse the stakeholder's interests and their power to influence.

û Department of Health

û Office of Government Commerce

û Social Services

û Supplier & Potential Supplier

û NHS Supply Staff

û Patients & their Representatives

û Emergency Services

û Voluntary Groups

û Staff

û GP