Porter’s model is one of the structured ways in which the industry environment is analyzed.

He
says that the stronger each of these five forces is, the more difficult it will be for the company to
raise prices and make more profits. A strong force is equivalent to a threat, a weak force is
equivalent to an opportunity. It is up to the operations formulators to recognize the opportunities
and the threats as they arise and design an appropriate strategic response from the operation
function. As it is a dynamic world, the strength of each of the competitive forces can change over
time due to factors external to (i.e. beyond the control of) the company. The relative strengths of
these forces can also be engineered by the company through an appropriate choice of a strategy
and thus, tilt the competitive forces to its advantage. For instance, in the Toyota production
system, the force of bargaining power of suppliers is lessened by removing the ‘bargaining’ bit.
This is done by means of ‘single sourcing’ and by placing tremendous emphasis upon vendor
relations and vendor development. The threat of substitute products can be minimized by
providing a variety in the first place. This requires an appropriate manufacturing strategic
response through a cost conscious yet flexible system of manufacturing. The risk of entry of
potential competitors can be reduced through making / providing a quality product / service as
the customer desires at an affordable price. Also, a wider range of product variety and timely
services could be provided. Bargaining power or buyer can be lessened through building long
standing relationships between the two companies through an atmosphere of transparency and
through a dedicated service orientation. Operations strategy and consequent actions can be built
around these organizational necessities.

(1) Risk of entry by potential competitors

(2) Bargaining power of suppliers
(3) Bargaining power of buyers
(4) Threat of substitute products
(5) Rivalry among established firms.

Operations strategic action and its relationship with other functional areas of management:

Operations strategies cannot function in isolation. A synergy is to be sought between operations

and other functions. A company’s competitive advantage stems from such holistic or complete
approach towards its strategic posture. There is no point in manufacturing function adopting a
strategy of product differentiation through superior quality, without an adequate supportive
strategic action by, say human resources development function to upgrade the skills of people
and enhance motivation through its HRD strategy. Similarly, the operations function needs
strategic support from the research and development function in improving the process
capabilities introduction of new/modified technologies or coming up with better substitutes for
inputs. Moreover, for modified new products, it is necessary that marketing function provides
insight into the customers’ requirements. In this case, marketing operations and R&D functions
have to work in tandem.

Ultimately, whether it is the operations strategy or a marketing strategy, its source is in

organization’s strategic decision and thus, all functional strategies have to serve the
organizational interests. For instance, lean production is a manufacturing response to the
organizational need for serving the customer just in time. Time based competition as an
organizational strategy leads to the manufacturing strategy of building flexibility and adaptability
in the production system. This again has to have a parallel supportive strategy of the logistics
function and appropriate marketing arrangements. IT must be noted that marketing under time
based competition is a wholly new ball game. The purpose (What are we trying to achieve?)
must be clear at the organizational level, so that appropriate functional strategic response is
generated supporting the organization’s purpose.