Overall competitiveness efficiency: A quantitative approach to the five forces model

Abstract

This study proposes Porter’s five forces model-based technique that measures a company’s competitiveness through objective indicators and metrics. We introduce a novel model, the overall competitiveness efficiency, which points out that a company’s competitiveness level incorporates capabilities matching five environmental forces. The five forces are: bargaining power of suppliers, bargaining power of buyers, threats of substitutes, threats of new entrants, and rivalry among existing competitors. The overall competitiveness efficiency model also consists of five dimensions: bargaining power against suppliers, bargaining power against buyers, competitive power against substitutes, competitive power against new entrants, and competitive power against competitors. We develop three quantifiable indicators for each dimension and operationalize these indicators with objective metrics. To show the models’ applicability, we conduct a case study in a hydraulics press industry company by collecting quantitative data from document analysis, secondary data analysis, semi-structured interviews, and observations. Our model gives managers insight into improving the company’s competitiveness by focusing on weaknesses and capitalizing on the strengths through measurable competitiveness indicators and metrics. The models’ implications guide managers in making strategic decisions on the competitive position in the market.