Managing a firm or any type of business could be a very time consuming and a stressful task. Usually the pressure of putting the whole organization in good hands is concentrated to the administrators and executives if it’s a corporation.
Now, there are a lot of theories and concepts that businessmen use to integrate their techniques and ways of handling their individual organizations and perhaps to make more revenues and profits in the long run. Most of these methods’ objective is to be able to increase overall sales which could only be done by either increasing customer satisfaction or finding a way how to deal with competition and monopoly.
There is this one framework that is commonly used in industry analysis and business strategies called the Porter Five Forces Analysis. According to the man who first proposed and generated this idea, there are five forces that could be used to determine the strength of an organization and together with its products and services against its competitors’.
Therefore, the variable being measured here is the competitive intensity of a market and in turn, measuring the competitive intensity of a market usually leads to a clear perception of the attractiveness of a market (Chapman, 2009). This paper will focus on critically evaluating the Time Warner Inc.’s methods and efforts to remain competitive in the market using Porter Five Forces analysis.
Competition inside the Industry
According to the traditional economic model used by old corporations a couple of decades ago, there is a great possibility that a company’s profit values will be driven to zero if the administrators and the whole company would not be able to address the competition problems against rival firms (QuickMBA, 2010). There are a couple of values that are used by economists to measure the intensity of competition between firms inside an industry. One good example would be the industry concentration. However, market share seems to be a more reliable source of information in determining the extent and level of competition of firms in an industry (Finkle, 2012).
According to Porter (2008) on the other hand, there is almost a constant level of competition in a particular industry. Competition in turn determines the appropriateness of a firm’s activities that can contribute to its performance. A firm’s performance is usually measured through the innovations, culture and program implementations that it was able to develop and execute. In order to be successful, Porter defined the term competitive strategy. The best indicator of a good competitive strategy would be a relatively strong, profitable and sustainable position against a business’ competitors.
Now, if we are to relate Time Warner Inc., which is one of the world’s largest media and advertising companies, there is a very good chance we are going to see a big and tight competition because there are a lot of media firms willing to take on the challenge of taking Time Warner Inc. down.
Some of Time Warner Inc.’s most troublesome competitors include Sony, Vivendi, CBS Corporation, The Walt Disney Company, and Viacom. It’s quite obvious that Time Warner Inc. is competing against traditional media companies. One good thing about Time Warner’s move in dealing with an extremely high level of competition in their market is that they always try to differentiate their products leading to a more diverse array of programs for their subscribers. Some of the best services that Time Warner used to gain a competitive edge against their competitors are their cable bundle services and the different TV shows and movies production they participated in. They also offer their subscribers holiday specials and deals. These altogether is probably the reason why Time Warner keeps on receiving a constant surge or demand even if they are under tight competition.
Time Warner is a company that has a lot of subsidiaries and the management has to frequently innovate and develop new features and projects for each and every one of these branches to be able to come up with good results in their programs’ market shares. So far, Time Warner Inc. has remained competitive in the media industry which is actually a good thing considering the fact that there are a lot of international media companies which are also aiming to be at the top.
Power of the Suppliers and Customers
One of the goals of Time Warner Inc. is to be able to provide the best goods and services to their potential customers. They even have a development program which is actually a policy statement that aims to deliver high quality services to their clients. One way of doing this according to their website is by purchasing goods and services from diverse groups only if they are of high quality and price-competitive (Time Warner, 2012).
According to the Porter Five Forces framework, one indicator that could be used to judge supplier power is customers’ power. These two are actually related. As long as customers are powerful, suppliers should remain powerful as well and vice versa. So using that derivation, the power of Time Warner’s suppliers and buyers are high and are in the firm’s favor—the ultimate aim of competitive strategy (Porter, 2008). These two are factors that could determine the profitability of Time Warner Inc. in the media and advertising industry.
If there is one area among the “five forces” where the Time Warner Inc. would be considered weak, that specific area would be the substitutes’. Media products and services’ sales could really be compromised by substitute products. Unfortunately, there are a lot of substitute products that could take place of the main products which are the television shows, movies and even advertisements.
We can even enumerate a lot of examples of possible substitute products for Time Warner Inc.’s main products by simply knowing the type of needs that the main products fill. Since Time Warner is a media company, it is quite obvious that the types of needs being filled are related to entertainment. There are lots of things that could be sources of entertainment these days and that would really be hurtful for Time Warner’s sales if people would resort to switch to the substitutes. Certain things that Time Warner should consider here would be the switching costs (how much would it cost to switch to the substitute goods), the inclination of the buyers to the substitute goods, and other factors that would influence their buyers to switch to patronizing the substitutes.
A common reason why most Time Warner Inc. partners and buyers switch to using substitutes is the price. We cannot neglect the fact that Time Warner Inc. offers their products and services for relatively high prices compared to their competitors’ and other substitute goods and services in the industry.
One good thing about Time Warner Inc. in relation to the five forces is that the threats they have for new entrants are very few. Since Time Warner is a media company, they do not have to deal with much details and steps in improving their market shares because all they have to think about is how to catch their market’s tastes. As long as remain successful in doing this, more and more viewers, and buyers will pop out because there are really very few barriers to entry in the media industry. As long as government policies and other international matters are dealt with properly, Time Warner won’t really have to worry about encountering problems that are related with their increasing market shares.
After analyzing Time Warner Inc. using the Porter Five Forces framework, it was evidently seen that the company, being an international and a renowned one in the media industry has strengths and weaknesses which are substitutes and entrants respectively. Despite their weaknesses (substitutes), Time Warner Inc. still remains competitive, thanks to the power of the suppliers and buyers which is also one of their strengths.
QuickMBA.Internet Center for Management and Business Administration Inc., 2010. Web. January 2012.
Chapman, A. Businessballs.com, 2009. Web. January 2012.
Finkle, J. Reuters.com, 2012. Web. January 2012.
Time Warner. Twsupplierdiversity.com, 2012. Web. January 2012.
Porter, M.E. The Five Competitive Forces that Shape Strategy. Harvard Business Review, 2008. Book. January 2012