FACULTY OF BUSINESS SCIENCES DEPARTMMENT OF ACCOUNTING

SCIENCES

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LECTURER: Mr. C. Mhonde

MODULE: BM 405
The use of Porter’s four corners in the financial sectors’ competitor analysis helps the industrial
analysts to look at the past, present and predict the future. This is done by analyzing competitors’
goals in order to understand whether they are satisfied with their current performance and market
position. This also helps analyst to predict how they might react to external forces and how likely
it is that they will change their strategies (Downey and Technical Information Service 2007) and
also improves management team of a company by looking externally. For instance, an institution
like Econet can better manage its competitors such as Netone and Telecel among others basing
on what drives them to survive within the industry. Thus, enhancing its goals to withstand the
competitive environment.

In addition, Porter’s Four Corners technique is predictive in nature that is proficient of

generating insights of what is being done by the competitors as well as the competitors’
capabilities basing on their day-to-day operations. The drivers, assumptions and strategies of an
organization will determine the nature, likelihood, and timing of the competitor’s actions. This
helps analyst to come up with recommendations on what can be done by institutions in order to
survive in the competitive market timeously. An institution can adopt and implement information
technology inorder to gain competitive advantage (Awamleh and Ertugan 2021). For instance,
taking a snapshot of what Steward Bank sort out to counterfeit its competitors within the
financial industry through a sophisticated improvement in technology noted from service quality
and digital distribution channels. Steward Bank found technology as a major strategy and a
driver at large which enabled the firm to gain competitive advantage, increased growth
opportunities as well as increasing sales. Although this has resulted in retrenchment of some staff
members, it is of paramount important to note that technology is deemed a booster, driver and a
strategy.

Furthermore, Porters four corners can help you in getting a better understanding of precisely
what competitors see when they look at their competition. The process allows the identification
of a competitive strategy that maneuvers around the rival’s objectives and strengths that plays to
the company’s capabilities. Kotler and Keller (2009) stated that pricing objectives should be
related to the company’s objectives and should follow the decision about where the firm wants to
position its products or services. One of the examples noted in the Zimbabwe business sector is
the pricing strategy which enables an institution like Econet to increase its sales volume and
market share. This is whereby Econet charges low data tariffs to its customers in relation to other
companies like Netone (competitor-based pricing strategy) so that it attracts more customers
thereby increasing sales. Concurrently, in relation to this view Econet assumed that customers
perceive low data tariffs as a driver and a strategy that can enhances its competiveness.

Moreover, Porter’s Four Corner’s Model is a useful tool for the self-assessment therefore it takes
into consideration the strengths and weaknesses of competitors firms and goes further to analyze
the capabilities of a firm. Thus, enabling several institutions, if not all, to assess their ability to
survive within the industry. This is whereby the entity reviews if the competition is succeeding
or failing with respect to its strategies. A well organized and detailed strategy may be hard to
obtain from competitors, rather firms can brainstorm strategies by incorporating some clues and
sources like competitor’s language, behavior, press releases, content production, partnerships and
geographical coverage. The analysis of these sources can determine whether a competitor-based
strategy has been financially successful.

In addition this model looks at the drivers of your company’s current strategy and tactics.in
doing so, you can quickly begin to figure out what has worked in the past and what has not. For
instance, suppose a particular marketing campaign has been effective for your competitors but is
not working for you currently. In that case, you might want to adjust your tactic to make it more
effective. This model can be instrumental if you are starting your own business because it allows
you to start innovating to quickly increase your company’s bottom line.

However, literature review from Redondo, (2014), have provided evidence denoting that Porters
Four Corner Model works better for direct competitors than indirect. This is due to the fact that,
it enables firms with the same capabilities, motivational factors and same competitive
environment rather than those with differences to analyze and critic the industry environment. As
a result, firms with different business mechanisms cannot apply Porter’s Four Corner framework
since it will produces a biased analysis. For instance, it is difficult for most of the financial
analyst to make a comparison between a Financial Institution like FBC against and corporate
firm like Econet although one may intent to argue that Econet is venturing into the provision of
financial services too. This is because these two companies have different motives, culture,
values and business environment. Therefore, some firms end up investing their time and
resources on other frameworks and models such as Ansoff’s Model which suits their basis of
analysis.

Again, some authors also believed that Porter’s Four Corner Model is just an estimator and a
guess work with no factual data to prove its worthiness. In other words it basis on assumptions
and not facts. According to Ries and Trout, (2000), Porter’s Four Corner Model was developed
as a predictor rather than a prospective framework. Thus, it enables the firm’s management to
guess what will likely happen to their competitors. The model bases everything on assumptions
rather than facts. Therefore, it highly depends on one’s opinion which might be biased from the
actual dimension of business operations. For instance, the management team for FBC might
assume that, CBZ will offer USD based loans to farmers to fund their agricultural production
which in essence according to CBZ it’s far from truth. As a result FBC, will end up making
biased decisions in an effort to counterfeit CBZ.

More so, Porter’s Four Corner Model is time consuming and cost to several firms as each
completion needs an analysis to be done because you must know how to analyze financial
statements and you also need to follow the rules and regulation set by accounting standards. For
instance, a financial institution like CBZ, through Porter’s Four Corner Model should do several
industrial competitive analysis to its competitors such as FBC, BancABC, ZB Bank, Steward
Bank, NMB Bank just to mention a few. This implies that the firm’s management should do a
competitive analysis for each company which requires a lot of time and resource to furnish the
analysis. Therefore, it is a cost centre of the firm.

Basing on the evidence noted from the discussion above, one can be in the right position to say
Porter’s Four Corner Model is of paramount important on industry competitive analysis
undeterred by its drawbacks. This is because it is of great advantageous to the firms when
analyzing its competitors owing to its merits such as the following; provides clarity to the
business around competitors activity, improves the management team of a company by looking
externally, aids decision making by understanding the operations of the competitors and its also
enables the firm to understand the business environment at large. On the other hand it is not
independent rather depends on other strategies such as Porters five forces model for you to
identify whether this is indirect competition or direct, product life cycle also to identify at which
stage the competitor is on, BCG to identify if the competitor has high market share or high
market growth and also the SWOT mapping to identify the strengths and weaknesses of the
competitors.
REFERENCES

Awamleh, F. and Ertugan, A (2021), the relationship between Information technology

capabilities, organizational intelligence, and Competitive Advantage. SAGE Publishing.

Downey, J. and Technical Information Service (2007) Strategic Analysis Tools. The chartered
Institute of Management Accountants.

Joshi, Rakesh Mohan, (2005) International Marketing, Oxford University Press, New Delhi and
New York ISBN 0-19-567123-6

Kotler, Philip.; Kevin Lane Keller (2006). Marketing Management, 12th ed. Pearson Prentice
Hall. ISBN 0-13-145757-8.

Kotler, P. and Keller, K.L. (2009) Marketing Management, 12th ed., Pearson, ISBN 0-13-
145757-8

Perry. R., Ross, M. and Technical Information Service (2008) Competitor Analysis. The
chartered Institute of Management Accountants.

Porter, M.E (2005) Competitive Strategy: Techniques for Analyzing Industries and Competitors.
Columbus, OH: The Free Press.

Porter, Michael (1998). Competitive Strategy (revised ed.). The Free Press. ISBN 0-684-84148-
7.
Porter, Michael (1998). Competitive Advantage (revised ed.). The Free Press. ISBN 0-684-
84146-0.

Ries, Al; Jack Trout (2000). Positioning: The Battle for Your Mind (20th anniversary ed.).
McGraw-Hill. ISBN 0-07-135916-8.