Convergence of Porter's Five Forces
Kuala Lumpur--I came across a 2008 update of Michael Porter's classic 1979 Harvard Business Review article on "How Competitive Forces Shape Strategy." Porter updated his original work to focus on five specific forces that shape strategy (see graphic), and what is most striking is that all five are actively at work in international education today. Few industries have so many disruptuive forces at work at the same time.
Much of the talk at EARCOS this week is about the explosion in new international schools across east and southeast Asia. Thousands of seats are being added monthly, and, as my previous post attests, itv seems that demand will support thousands more. The "threat of new entrants" is not so much threat as reality.
As options proliferate, the bargaining power of buyers increases and the power of suppliers correspondingly drops. Without clear differentiation in a market, the race is on to be the lowest price school--never a good situation! Substitute education products are, for the first time, both widely available and of high quality. Online options, including an online IB, are reasonably priced work-arounds to otherwise unacceptable schools or even home schooling. And, lastly, the rivalry has never been more intense between existing competitors, even those whose market segments would not seemingly overlap; e.g., British and America curricula.
Porter says this convergence of what would now be called disruptive forces puts enormous pressure on strategy to claim a new market position less vulnerable to attack. Unless such a position can be found, it is almost impossible for any organization to earn attractive returns (in the for-profit sector) or claim sustainable advantage (for nonprofits). If we accept that strategies are really bets about what will lead to success in the future, then the ante just went up.