Discuss Optus' competitive market position by using Porter's Five Forces Model
This essay will discuss Optus’ competitive market position through the analysis of Porters Five Forces Model. Optus, Australia's second largest telecommunications company is situated in a constantly changing environment, easily illustrated by Porters Model.
Introduction of Porters Five Forces Model
Porters Five forces model is an analytical tool developed by Michael E. Porter in 1979 whilst he was studying at Harvard Business School. Understanding Ports Five Forces brings to light an industry’s current profitability and develops a framework for making educated calculations for anticipating and influencing the competition. Porter wished to create a universal framework which can be utilized in all industries such as the automobile and performing arts industries. The model has five key components which highlights a market’s competitive intensity and overall attractiveness. The strongest force or forces determine the profitability of the industry and form the basis for the strategies that are utilized by the company. The five components of the model are the degree of rivalry; the threat of new entry; the threat of new substitutes; buyer power and the supplier power. Porter describes the five forces as creating a significant framework for different industries such as the fierce rivalry and strong buyer power in the aircraft industry but with relatively benign threat of entry, threat of substitutes and supplier power. Porter envisioned the model to extend the knowledge of Industrial Organisation. The forces explain how a company organises itself in order to satisfy the needs of the consumers with both quantity and quality, while at the same time maintaining or increasing the profits of the company. However this model does have its’ limitations, Porters Five Forces is not designed for an individual firm but rather for the industry as a whole. With an understanding of Porters Five Forces Model, Optus' competitive market position becomes a simple concept to visualize.
Degree of Rivalry
Rivalry is the first force to consider when analysing the competitiveness of a market. Though considered important, it is crucial to understand that the degree of rivalry is only one of the five forces that influence the competitive state of the market. Profitable markets constantly attract new firms which impacts the overall profitability of the market. Optus is one of the largest telecommunications companies in Australia, second only to Telstra, making up thirty-three percent of the industry. As a significantly large employer of 10, 500 employees and serving 8 million customers, Optus provides a strong degree of rivalry towards the rest of the competition. However, like smaller telecommunications companies, it must depend upon Telstra's infrastructure in order to provide its customers with the quality and support that it advertises. This puts Optus at the mercy of Telstra's...