Analytical frameworks Essay Example | Topics and Well Written Essays - 500 words

Analytical frameworks - Essay Example The Porter’s theory is known as the ‘Porter’s Five Forces Method’. According to Boone (2012), porter’s theory states that a business should consider five aspects to maintain a competitive edge on a given industry. The five forces include: threat of substitute products; threat of new entrants; bargaining power of consumers; threat of established rivalries; and, bargaining power of suppliers. Porter provides that an industry which is characterized by low-entry and high-exit barriers is likely to suffer from decreasing profits in the long-run. In this regards, a firm that is intending to maintain high profits in the long run should choose that industry that is associated with high-entry and low-exit barriers. In relation to substitute products, Nour (2013) provides that availability of similar products enhance the chances of a buyer switching to other goods and services. Porter emphasize that attention should be paid to quality and price as far as an industry that is characterized by substitute products is concerned. An industry that has a few firms relative to the number of suppliers is likely to experience a low price of raw materials and other inputs. The ratio of buyers to firms in an industry affects the profitability of a given industry. Loyalty and other practices are employed to reduce the influence of consumers’ bargaining power (Alter, 2000). In regards to established firms rivalry, a firm should consider innovation and other effective business strategies to maintain a competitive edge relative other firms. In order to test the Porter’s five forces model, a case study of a bakery firm known as Hrstic, trading in Croatia, would be analyzed. An analysis was performed to find out the future of small bakery businesses operating in Croatia. This is due to the fact that there are 374 small sized firms in relation to 8 medium and 2 large bakery companies. In addition, it is reportedly that approximately 2,500 bakery firms