Five Forces Model framework developed by Professor Michael, E. Porter of Harvard Business School in 1979, is a powerful strategic business assessment tool useful in strategic assessment of business position in a volatile competitive market situation to understand where the business competitive power positions and analyze both the current competitive strength and the position which the business is intended to move into to gain profitability while and customer’s desirability’s. Chapman, A. (2009) established that, “Porter’s Five Forces Model offers advocated opinions which can improve a broad and sophisticated analysis of competitive market positions, as might be used when constructing business assessment strategies, plans, or making investment decisions about a business” Porter’s reputable five forces model are useful framework to GE Oil&Gas and Energy business operations to determine its competitive power in situations as follow;
1. Threat of Product Substitution: GE operates an aftersales market services to all its customers globally from our Global Sales & Services segments on framework agreements and contractual services agreements basis. The essence of this agreements, are because GE been an Original Equipment Manufacturer (OEM) and considering the technological designs of their original equipment’s, liaisons with customer for partnership for aftersales market follow-on to ensure provision and training of expertise for equipment handling and services. And also, GE operational capabilities in manufacturing their equipment spare parts are GE strategic competitive market position strengths to shade off fair for threat of product substitutes. This strategic model with sophisticated technological innovative designs guarantees GE to gain customer’s unweaving attractiveness.
2. Threat of New Entrants: Among many key competitors of GE, Rolls Royce, Siemens, Solar Energy etc. are GE new market entrants in Oil&Gas and Energy industry but because of GE global (Manktelow, J. & Carlson, A. 2012) strong and durable barriers to entry, preserve favorable market position and take fair advantage of it following its innovative technological oriented equipment’s and industrial operational structure to gain power in cost and time to enter market to compete effectively, leverage to protect threat in technology imitation, barrier to entry and alternative access to distribution channels. By this strategic model, (Williamson et al. (2004, p.82) GE advance large suck cost of entry to generate profits in their existing and innovative products without attracting new entrants.
3. Buyers Power: GE Products are sold globally basically to the 3rd and emerging 3rd world countries governments and world class manufacturing companies. Because of this fact, GE has built a strong competitive market position and publishes their aftermarket services rates (the cost of field service engineers and provision of expertise for equipment handling etc.) annually and products like running spare parts quarterly or give customer expected time of cost change of some spare parts (due to foreseen supply chain network, economic situation etc.) through a proposal which makes GE products enjoys customers price friendly approach among its similar product competitors thereby, lowering the buyers power in their choice of switching costs and purchase some items in large quantities since in GE technology protection capability, neither the customer nor GE competitors have the ability of producing such products hence buyers power to dictate buying price or bringing down product prices are incapacitated but rather, enjoy discounted prices as maybe requested.
4. Suppliers Power: Based on the statement of fact as described by Williamson et al. (2004, p.82, figure 7.3.4), that the factorial influences of buyers power are similar to that of suppliers power but acts in opposite directions. There is need therefore, for Suppliers Power strategy as a useful business assessment technique to be built into supply chain network of a firm to position in a volatile competitive market in the need for an assistance to deliver up to customer expectations thus generating profits by ensuring that;
1. There are many customers and increase to alternative sources of product supply.
Example: GE Global Sales & Services business unit has a global supply chain unit that is further grouped into core product manufacturing and supply chain management units (Affiliates) and the use of enterprise technology process helps to synchronize all the supply chain activities to provide a unique opportunity identification number (Oppt./ID). The supply chain operations starts by GE local operations entity to win customer order with local markup base on proposal from the affiliate and a local purchase order will be issued to the core business unit that owns the Oppt./ID. And also, owning to the saying that “no man is an island” and GE in its innovative designs, does not claim sole owner of the components that make up their innovative designs and by these, partners with its OEM as suppliers of the parts as a supply chain strategy to gain sustainability in quick response to customer request for products and thereby leveraging the multiple channel of supply power to gain customer attractiveness and hence business profit maximization.
2. The product and service supplied to customer has an important input to customer Operations through constant development of new products and aftersales market follow-on, etc. A typical example of this is a recent invention of Human Machine Interface (HMI) that monitors different customer manufacturing platform and synchronize them in one visual output where customer will leverage the technological advantage to control their entire platform in a named location via a unified source. The innovative approach of GE is one of its business models of supplier power both in products or services purchases that are done competitively.
3. There are no substitutes to a number of products supplied through its technological design. Etc.
5. Competitive Rivalry: Yes of course, rivalry exist among GE industrial members but GE has a tremendous competitive market position strength among its rivalry since most them cannot do what GE is doing to penetrate in most of the already prevailing business regarding the technological and innovative design and quality services of GE equipment’s which are relatively unique and cannot be imitated by its competitors.
Example: Most Customers in Oil&Gas and Energy industries in my organizational region (Nigeria) uses GE as a single source supplier in most products and services because, most of their products and services are been rendered directly to the customers without involving a third party supplier and in the process, ensuring that products are not imitated and services reaches the customer according to quality and specifications with those concepts, Achioso, P. (2012) as reference in Chopra & Meindl (2007, p.45) described as competitive factors that distinguishes between what are sometimes called ‘order-winning and order qualifying.
In conclusion, following the above evaluation in GE business market position assessment strategy, GE offering aftersales market service of their products is clear evidence that the GE business in volatile competitive market position, its product have sustainability competitive advantages over its rivalry by the virtue of innovation, technological advancement and quality service delivered to customers.
Achioso, P. (2012) Response to SOMANA Week 4 DQ: The concept of order winners and order qualifiers and why managers find it useful to use these definitions to establish the relative importance of certain performance objectives [Online]. Available from: University of Liverpool/Laureate Online Education Blackboard (Accessed: July 14, 2012). Chapman, A. (2009) Porter’s five forces model: Michael E Porter’s five forces of competitive position model and diagrams [Online]. Available from: http://www.businessballs.com/portersfiveforcesofcompetition.htm (Accessed: July 13, 2012). Chopra, S. & Meindl, P. (2007) Supply chain management: strategy, planning, and operation. 4th Global ed. Englewood Cliffs, NJ: Prentice-Hall. (p.45) July 13, 2012).
Manktelow, J. & Carlson, A. (2012) Porter’s Five Forces: Assessing the Balance of Power in a Business Situation [Online]. Available from: http://www.mindtools.com/pages/article/newTMC_08.htm (Accessed: July 13, 2012). Williamson et al. (2004) Strategic Management And Business Analysis.
4th ed. Rougtlede. (pp.77-84).