Five Forces and Enactment Model to TESCO
【 发布时间：2012/2/8 】
Five Forces and Enactment Model to TESCO
Porter’s Five Forces Model, as put forward on 1980s, influences significantly to global enterprises competition strategies enactment. Different composition changes of the five forces will spin the changes of industries’ profits. Opposite to competition consideration, Smircich and Stubbart’s enactment model is more environmental focus and targeting to realize the fitness among strategies, organizations’ structure, and the environment. In the essay, the two approaches will be discussed separately first to know the contents of the models, and then, the differences will be compared. Critically, the case of famous supermarket TESCO will be analyzed under Porter’s Five Forces and Smircich and Stubbart’s Enactment Model to see which model is much more effective to organizations and how they can cooperate to better application.
Porter’s Five Forces
The five forces can be illustrated briefly as follows:
Resources from Porter’s Five Forces (2008)
The entry of new competitors, competitive rivalry, substitute products or services, the bargaining power of buyers and suppliers are the five forces as the micro environment of a business.
l The Entry of New Competitor
The high returns of an industry will attract new firms’ entry, which will decrease the profitability for all firms in the industry unless there are incumbents blocking new firms from entry.
l Competitive Rivalry
Existing competitors are mostly the major determinant of an industry. Rivals are piling up their competitiveness by innovation, advertisement, online promotions, and other approaches.
l The threat of substitute products
Lower price of substitute products, wide selection of substitutes, and changes of buyers’ habit, and others will distract buyers to the substitutes.
l The bargaining power of customers
As the market of outputs, customers’ bargaining power with large volume require, availability of existing substitute products, and budgets or costs control, will definitely influence the business.
l The bargaining power of suppliers
As the market of input, if suppliers themselves are with little substitutes, then, the business will be mostly controlled under the suppliers.
Any changes of the forces will result re-assessment of the marketplace.
Porter’s Five Forces to Tesco
l Brief Introduction of Tesco
Tesco, growing up from a small grocery in 1924and expanding from the traditional retailer of foods and associated products to electronics, telecoms, entertainment (videos, books), clothing, flowers and games, even providing a full range of online & financial services globally (Tesco, 2010), develops to the largest retailer in UK and world No.2 leading retailer by profit (Deloitte, 2010), tightly chasing after Wal-Mart and Carrefour.
l Porter’s Five Forces to Tesco
Porter’s Five Forces Model will be applied to better understand the reason on the booming expansion of Tesco worldwide.
Smircich and Stubbart’s Concept of Enactment
Smircich and Stubbart (1985) put forward a different approach to industry and strategy with three models of an objective environment, the perceived environment, and the enacted environment. The three models offer strategists creating environment-strategy-structure fits (Barry E. Langford & Frank R. Hunsicker, 1996). To Smircich and Stubbart (1985), the environment is a specific set of events and relationships noticed and made meaningful by a specific set of strategies. Organization, a set of people, sharing beliefs, values, and assumptions, mutually runs for the set targets. Detailed environments under the enactment model will be discussed as follows:
l The objective environment
For the uncertainty of external environment, March and Simon (1958) imply the impact of the objective environment on organization. The objective, real and existing environment, which is independent from the organization but will result in opportunities and threats, shall be analyzed. The analysis is generally referring as SWOT analysis.
l The perceived environment
Under the objective environment, the imperfect and incomplete knowledge of the objective environment will result the uncertainty of the strategy made by strategists (Duncan, 1972). The strategists shall first minimize the gap between their flawed perceptions and the objective environment (Smircich & Stubbart, 1985). Strategists will be flawed for incomplete information, lack of experience, and other internal problems.
l The enacted environment
The enacted environment is a limitation to the objective environment. The principal participants of the market will enact rules to organizations and the environment of the industry (Burrell & Morgan, 1979). The social actors are primarily control the external environment of a business, which is out of strategists and the organizations control. These parts of environment shall be perceived previous to limit the losses of a business.
Smircich and Stubbart’s Concept of Enactment to Tesco
l SWOT Analysis to Tesco
To Smircich and Stubbart’s concept, it is necessary to do SWOT analysis to see the differences vs. Porter’s Five Forces. As suggested by Needham et al, (1999), “a SWOT analysis is a useful approach to examining the relationship between an organization and its marketing environment.”
Comparison between Porter’s Five Forces and the Enactment Model
As mentioned previously, the differences of Porter’s Five Forces and the Enactment Model can be sorted as follows:
l Porter’s Five Forces is more micro environment considering. The enactment model is more macro environment consideration.
l The Five Forces model is more focused on the competition environment. It is criticized by professionals as a theory thinking but not practical. Because, there are two assumptions set before the Five Forces, one as the overall understanding of the industry’s information. It is really hard to realize the level. Second, there is only competition but not cooperation among competitors. In real life, rivals are also partners sometimes. More important, Porter supposes that the market share is fixed without change. Practically, the market share can be expanded by the inspiration of market developers.
In contrast to these assumptions, the enactment models are more practical, which consider the uncertainties as many as possible. The enactment model takes the flaws of strategies into consideration. It also includes the enacted environment, which will lead to the inability of Tesco under the enacted policies or nature disasters or else.
l Both models are indexes for evaluating the organization’s situation in the market/ industry to make strategies. The two models points out that Tesco is in an absolute advanced situation of the market.
In conclusion, the essay suggests combining the two models of Porter’s Five Forces and the Enactment Model together to evaluate the situation of an organization. Because making strategies to industries shall know both the micro environment and macro environment. Five Forces model is deeper through and detail in the internal and external environment analysis under assumptions. The enactment model perceives the incompleteness of strategists between environment and organization, which is also a critical joint in strategy, as well as the limitation of the enacted environment, is a great supplement to Porter’s Five Forces. In the case of Tesco, the strategist shall not only know the competition environment, but also considering to organize a team with rich experience and comparatively complete knowledge background on the industry to get better strategy plan. As the leader of the market, Tesco shall also consider to enact rules/ regulations as main market participants to avoid limitation/enactment from other social participants or sectors, so as to limit the impact of the enacted environment.
Akshay R. Rao, Mark E. Bergen, et pal, (2000), How to Fight a Price War, Harvard Business Review;
Barry E. Langford & Frank R. Hunsicker, (1996), An Integrated View of the Relationship between the Organization and Its Environment, West Georgia College;
Burrell, G. & Morgan, G, (1979), Sociological Paradigms and Organizational Analysis, Heinemann, p.1-37;
Deloitte, (2010), Global Powers of Retailing 2010, Retrieved 18 August 2010;
Duncan, K.D., (1972), Strategies for Programmed Instruction: An Educational Technology, London, UK: Butterworth;
Michael E. Porter, (2008), The Five Competitive Forces that Shape Strategy, Harvard Business Review, p.86-104;
Mark, (2009), Tesco’s Still Pushing Discount Products to Fight Back Competitors, available at www.news.idealo.co.uk;
March, James G. and Simon, (1958), Organizations, John Wiley & Sons;
Needham, D. et al, (1999), Business for Higher Awards, Oxford, Heinemann, 2nd Edition;
Smircich & Stubbart, (1985), Strategic Management in an Enacted World, Academy of Management Review, Vol.10 (4);
Tesco, (2010), main website, available at www.tesco.com;