SOCDIM – Porter’s Five Forces

This week’s discussion was about Porter’s Five Forces. Basically, it’s about figuring our where power lies in a business situation. The five are:

  1. Supplier Power
  2. Buyer Power
  3. Competitive Rivalry
  4. Threat of Substitution
  5. Threat of New Entry

Well, if you look at these five, you can practically understand what they’re about without further explanations. Or so you’d think. We had a group reporting activity, with each group identifying what a sample company’s situation is. An example instance would be: If your start up cost is very low, where does your power lie? Funny thing about that activity is, even with the explanations on the handouts, many of us ended up scratching our heads in wonder.

It’s not that the case is difficult, but more of…well, some of the scenarios may or may not fall under two or more forces. I did enjoy the activity, however. Mostly I could see Level Up! Inc., the company I’m currently working for, harnessing nearly all five forces in one area or another. (Uh, did I mention I love my work very much and I’m still brokenhearted by my resignation, which was borne out of necessity? Hehe.) I had fun explaining to the class some of the stuff we had to do, without giving away sensitive/confidential info, of course.

The first three forces are easily understandable. The first being the power held by the supplier, if the supplier is the only one who could provide the product or if it is the only one who could provide the best possible service.

The second force is where buyers emerge as the priority. Buyers come into power if they have the leverage to demand; if the suppliers are many and the prices are more of less on the same range.

I’m mostly fascinated about the fifth force, which was why I volunteered to discuss that for the group. We people from the Game Development group are always on the lookout for new games, just to see if these would have the possibility of killing our number one game, Ragnarok Online, which also happens to be the #1 MMORPG (Massively Multiplayer Online Game) in the country. Of course, this is the fun part of our job. Being the gamers that we are, we get to see the weaknesses and strengths of Ragnarok Online in comparison to the new games that other companies come up with. That only means one thing: play till you drop. Hehe. Not really. It’s usually all about computations, game balance, bug testing/reports/documentations, coordinating with every department, process flows, and solutions to recurring problems.

I’m also quite interested in the fourth Force. I find it funny how technology moves so fast many of our new inventions become obsolete in the span of a few years. One classic example of this was the pager. Remember how Power Page got so popular that suddenly there was Easy Call, Jaz Page, and all that? But Power Page wasn’t killed by any of these competitors. Guess what killed it? You may just be holding it in your hand right now, or it’s somewhere in your bag. All you’ll ever need to know is that you now can’t live without it.

Competitive Rivalry, the third force, encompasses all other forces. That’s why it stays in the middle of Porter’s Diagram. This is also the reason why the class found it difficult to tell which scenarios fall into this category. All the other forces boil down to this one force. In other words: this is like the Anakin Skywalker of Porter’s Five Forces.

Now…I’m wondering where I’ll be using this bit of information if ever I do get up the courage (and enough funds) to start my own business again.

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