Porter’s Five Model Analysis and Hofstede Cultural Dimensions Essay Example

  • Category:
    Management
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
    3
  • Words:
    2023

Porter’s Five Model Analysis and Hofstede Cultural Dimensions

Executive Summary

This report takes a closer look at the business performance of Tassan Ltd using various models in order to establish its competitiveness in automotive industry. In regard to Porter’s Five Forces Model, first aspect to consider is new entrants into the market. Second aspect is economies of scale prior to maxmizing its production. Thus, the company must consider the difficult situation it will encounter before entering the market. Other considerations which have been discussed includes brand loyalty, capital requirements and analysis. Another model which has been used to evaluate the company’s competitiveness is Hofstede cultural dimension. Aspects that have been discussed includes power distance, individualism, masculinity and pragmatism. As such, by incorporating the aforementioned models in its analysis, Tassan Ltd will be capable of setting its business strategies and attain a competitive edge against its rivals.

Introduction

Tassan Ltd being a new company in the market has to put into consideration various factors that would enable it to compete in the automobile industry. This can be attributed to the fact that the automobile industry is quite competitive. Tassan is in the business of manufacturing motor vehicles. Therefore, Tassan being new to the market they have incorporated Porter’s Five Forces Model in order to compete with already existing companies that have created a name for themselves. Porter’s Five Forces model is a tool used by various companies to analyze the potential of that company in realizing profits upon entry into a given industry.1 Therefore, with the assistance of Porter’s five Forces it becomes quite easy for Tassan to estimate the amount of profits it is going to realize. Additionally, using this model the company has the ability to achieve its primary objective which is to be the leading automotive company in Australia/.

Additionally, since the company is wishing to employ employees from two different countries namely Australia and South Korea, it is equally important to understand the cultures of both countries. Therefore, using Hofstede’ Cultural Dimensions it becomes quite easy for the company to understand and incorporate both cultures within the company.2

Porter’s Five Forces Model

As earlier stated Porter’s Five Forces model is an important framework in assessing the potential of a company to realize profits in any given industry. The model consists of five factors which assist companies in determining their viability in a given industry. Therefore, this model could prove to be quite useful to Tassan as it tries to fight off competition from already established companies in the automobile industries. Therefore, by looking at each factor in relation to Tassan it becomes possible for Tassan to plan ahead in maintaining it competitive edge within the automobile industry.

Threat of new entrants

New entrants to any given industry raise the level of competition in the said industry, which can be attributed to the fact that new entrants affect prices, supply, costs and investments required to compete with them. Therefore, in industries where the entry barriers are very low it increases the rate of competition which does not go well with established companies. This can be attributed to the fact that at times new entrants diversify from the already existing companies. This in turn distorts the manner in which established companies operate since they have to adjust to compete with the new entrants.3 However, entry barriers also serve as an advantage to the already established companies over new entrants. Entry barriers exist in various forms such as;

Economies of scale

Economies of scale relates to costs incurred in production of goods by any given company in an industry. Normally, the more a company produces the lower the cost per unit, which is attributed to the fact that the costs are distributed over more units. Additionally, established companies may enjoy a lower cost per unit due to the technology they incorporate or enjoy better terms with the suppliers.4 Therefore, new entrants such as Tassan could find themselves in a difficult situation to afford any meaningful competition towards the established companies.

Brand Royalty

Brand royalty offers yet another hurdle to new entrants, because established consumers have created a name for themselves. This means that despite the entry of new companies with favorable condition some consumers will stick to the already established companies.in Australia for instance the major automotive companies include Toyota, ford and Mitsubishi. Therefore, customers will generally purchase cars from these companies, since they are accustomed to their products and most importantly their brand. Therefore, the extent to which a customer considers a brand before making purchase greatly undermines products from new entrants.5

Capital requirements

In addition to the above barriers, capital requirement is another entry barrier for any company wishing to start a business in a given industry. It is a common knowledge that for any business to succeed they require capital. However, the amount of capital determines whether they are capable of competing with already existing companies. This is attributed to the fact that new companies enjoy support from financial institution compared to new entrants.6 Therefore, capital can indeed be a hindrance for new entrants into the market.

Analysis

Therefore, based on this factors the threat of entry for new companies like Tassan is quite high, thus they will need to be wise in conducting their businesses. One of the ways they could achieve this is by diversifying their products. This means that they will have to incorporate new ideas such as the use of technology in an effort to tilt the balance on their side.7

Threat of substitutes

Substitutes are products which perform similar functions as the key products in a given industry. The presence of substitute may worry any industry, and could lead to realization of lower profits by companies within a given industry. Substitutes can arise due to changes in technology leading to innovation of new products. Additionally, substitutes are sold at a much affordable prices than key products of an industry. Therefore, it is necessary for companies in any given industry to always have a strategy on how they will cope with substitutes so as to avoid loss of profit.

Brand loyalty

Consumers will in most instances remain loyal to a specific brand despite the availability of products from other brands. However, this loyalty could change as a result of substitutes, whereby substitutes offer a greater satisfaction and are obtained at a much affordable price. Therefore, it is necessary for companies to ensure that their products rank way much better than substitutes. In doing so they are guaranteed of profits from their products.8

Analysis

Tassan being an automobile company could face stiff competition from its rival competitors. This is because consumers are easily swayed by performance and affordability of products. This means that if they are capable of meeting consumers’ need at an affordable price then they are likely to win consumers of their rival competitors.

Hofstede’ Cultural Dimensions

Hofstede cultural dimension are incorporated in organizations that constitute of individuals from different cultures. Therefore, it is important to understand and take into consideration each of the cultures found within an organization. This is to say that all cultures should be embraced and treated equally. In doing so the employees are motivated in doing their duties which translates to high productivity thus high profits.9 However, in order to merge two different cultures it is important how each cultures compares to Hofstede cultural dimensions. In doing so it becomes easier to identify the similarities and differences that exist between two or more different cultures.

Power distance

This dimension deals with how people react to inequalities of life in relation to power. In South Korea individuals respect hierarchy in that everyone is content with their position. However, this is not the case in Australia where hierarchy is a matter of convenience. This means that in Australia individuals advocate for equality.10

Individualism

This dimension, on the other hand, deals with how individuals perceive themselves in a society.11 In Australia individuals are independent from each other, whereby everyone lives their own life. However, this is not the case in South Korea where individuals embrace communism. In relation to employment hiring and promotions in Australia depend greatly on individual merits. However, in South Korea hiring and promotions depend on family ties or close relations.

Masculinity

This dimension states that a masculine society is competition driven always striving to be the best in whatever they do. However, a feminine society embraces the quality of life, meaning that it is not always about winning.12 Therefore, in relation to this, Australia is perceived as masculine society while South Korea is viewed as a feminine society.

Pragmatism

This dimension states that it is impossible to understand and explain the complexities that exist in the world.13 Therefore, one should abide by the truth and live a life guided by virtues. Based on this Australia cannot be said to be pragmatic nation as they are always trying to establish the absolute truth. However, South Korean societies will not try to explain thing that are beyond their comprehension, but will rather abide by the virtues set out before them.

Therefore based on this dimensions Tassan can adopt the competitiveness of the Australians in an effort to ensure that they are capable of competing with already existing companies. Additionally, they should adopt the Australian approach of equality in the workplace. In doing so they ensure that all individuals who have something to add to the company are heard. However, they should adopt the south Korean understanding of a society, in that it is not always about ‘I’ but ‘we’, in doing so it bring out the best in every employee and no employee could feel left out or isolated when it comes to, matters of the company.

Conclusion

In conclusion, Tassan ltd could earn and maintain a competitive edge over their rival companies by using Porter’s Five Forces model. This is because by a adopting this model the company is capable of strategizing on the barriers that they are going to encounter in the course of their businesses. Additionally, by incorporating this model they are able to estimate the viability of the market in relation to the profit they are likely to attain in the automobile industry.

In addition to these, with the help of Hofstede cultural dimensions theory the company is capable to merge to cultures to work together for a common goal. This is achieved by ensuring that both cultures are considered in the running of the company. This creates unity in the company and is a motivators for the employees to put as much effort as they can into the work.

Bibliography

Beugré, Constant D. A Cultural Perspective of Organizational Justice. North Carolina: IAP, 2007.

Cullen, John K. and Parboteeah, Praveen. Multinational Management. New York: Cengage Learning, 2013.

Henry, Anthony. Understanding Strategic Management. Oxford: Oxford University Press, 2011.

Hill, Charles and Gareth, Charles Jones. Strategic Management Theory: An Integrated Approach. New York: Cengange Learning, 2009.

Paul, Justin. International Business. New Delhi: PHI Learning Pvt. Ltd., 2011.

Porter, Michael E. On Competition. Boston: Harvard Business Press, 2008.

Schriesheim, Chester and Neider, Linda L. Perspectives on Justice and Trust in Organizations. North Carolina: IAP, 2012.

Soares, Ana Maria, Farhangmehr, Minoo and Shoham, Aviv. Hofstede’s dimensions of culture in international marketing studies. Journal of Business Research 60, (2007): 277–284

1
Anthony Henry, Understanding Strategic Management (Oxford: Oxford University Press, 2011), 66

2
Chester Schriesheim and Linda L. Neider, Perspectives on Justice and Trust in Organizations (North Carolina: IAP, 2012)

3
Anthony Henry, Understanding Strategic Management (Oxford: Oxford University Press, 2011), 66

5
Michael E. Porter, On Competition (Harvard Business Press, 2008), 3

6
Justin. Paul, International Business, (PHI Learning Pvt. Ltd., 2011), 153

7
Charles Hill and Jones Gareth Charles, Strategic Management Theory: An Integrated Approach (New York: Cengange Learning, 2009) 54

9
Constant D. Beugré, A Cultural Perspective of Organizational Justice (IAP, 2007), 54

10
John K. Cullen and Praveen Parboteeah, Multinational Management (New York: Cengage Learning, 2013), 150.

11
Ibid 153

12
Ana Maria Soares, Minoo Farhangmehr and Aviv Shoham, Hofstede’s dimensions of culture in international marketing studies. Journal of Business Research 60, (2007): 280

13
Ibid 281.