Little attention is given to the government in the contemporary organization literature. Scholars in the field invest significant efforts in the study of business schools of thought instead. The approach negates the value of government institutions as an important component of the sea of organizations – the largest organizations in the world are agencies of the US government (Kelman, 2007). The separation in the study of the field of public administration in the mainstream of organization studies has seen it relegated down the pecking order into an unequal state. The centeredness on business schools is driving the evolution of organizational research that is isomorphic to its environment with a particular focus placed on performance issues. According to Kelman (2007), lack of perception of the government as an organization belittles the reformist agenda of improving its performance. Subsequent developments focused on managing constraints such as corruption or misuse of power in public organization environment.
The evident lack of concern about performance among public stakeholders betrays the developments in the last decade that has seen interest to improve government performance increase among practitioners. Organizational development is a concept that is uniquely suited to government organizations, implying the need for application of organizational performance concepts and theories. The need for governance in federal agencies to influence the direction of the society is attributed to factors such as globalization, liberalization and privatization of public utilities, marketization of public services, pressure to ensure representative participation in a democratic way, the power of business firms, ideological approach to neo-liberal policymaking, and the search for effective policy-making. These factors are subject to the influence of Porter’s five forces that shape strategy.
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Contextualizing Potter’s Five Forces in Government Setting
In the modern dispensation, even governments compete for the global market. Like organizations, governments are complex administrative systems where implementation of change requires a comprehensive understanding of the environment of operation. There are a number of government operations that need strategic management approach including management of the aftermath of the economic crisis, taxation, social and environmental responsibility, regulation of information and communication technologies, standardization of products and services, and responses to security concerns driven by proliferation in terrorism (Wood & Wright, 2015). The implications for businesses operations in the globalized marketplace are wide-ranging.
The US has historically been head and shoulders above other countries regarded as its industrial competitors in research and development investment and the resultant manufacturing productivity. As a result, its exports superseded those of its competitors including EU members. However, a paradigm shift has emerged over the last few years. Globalization has opened up markets formerly inaccessible to emerging economies. The rise of economics such as China, India, Japan, and Brazil have disrupted the status quo. The US and the UK have been forced to be reactive as evidenced by the recent trade tariffs by Trump’s administration and Brexit vote. The developments have served to highlight government underperformance, which economists have linked to protected monopolies that lead an easy life devoid of performance pressures.
The role of strategy in public and private sectors cannot be understated. According to Vining (2011), public agency managers need a modified version of the five forces framework for implementation of public programs. The modification process adopts descriptive, instrumental, and normative approaches. External factors that need consideration are political influence and economic factors. The objective is to achieve autonomy and social efficiency. However, Narayanan and Fahey (2005) posited that the institutional context in emerging economies is governed by three main factors namely: transactional costs, capital flows, and laws governing rivalry. However, assumptions on these qualifiers are rarely met in emerging economies, hence the need for derivative frameworks to tackle the unique institutional contexts. Nevertheless, Porter's five forces framework is the basis for the development of a strategy to ensure performance for survival in the modern political and economic dispensations. Markets are becoming increasingly dynamic with competition intensifying between economies. According to Potter (2008), awareness of the five forces is helpful in understanding the structure of the industry and achieve a position that is more profitable and less vulnerable to attacks. Nicita, Neagu, and Kee (2010) argued that the collapse of economies following the 2008 recession led to an understanding of the forces driving the market and the rise in protectionist trade policies as a countermeasure. Governments implement these measures on a larger scale compared to business organizations.
The threat of New Entrants
The US manufacturing industry has been lagging behind over the past few years allowing the likes of the Chinese steel industry to overtake it. Initially, the US would be less concerned because of the closed nature of its market. However, bilateral trade agreements have opened up global markets to new entrants and competitors. The initial protection accorded by FTAs through different external tariff rates among members of say NAFTA is first diminishing. By any standards, the threat of new entrants is high, implying the US government cannot rely on economies and inefficiencies. According to Porter (2008), such a situation, where the threat of new entrants is high, calls for an innovative strategy that positions the country for the future. However, The US approach has largely been reactionary. The introduction of trade tariffs that threaten a global trade war has not been received by other economies eying a share of the US internal market. Countries such as Canada and China have been forced to mull over introducing countermeasures that can prove detrimental to the US future position in the global market. The introduction of punitive trade regulations and tariffs belly the benefits drawn from other political factors such as stability low risk of military invasion, industrial safety regulations, and product labeling requirements that attracted foreign investment from external favored partners.
Bargaining Power of Suppliers
The reason cited by President Trump administration to justify the enactment of new trade regulations and tariffs is that American manufacturing industry needs protectionist policies to advance. The approach violates the spirit of the free market economy causing a significant burden on consumers. Porter (2008) observed that the presence of a few suppliers in the market gives them bargaining power over buyers. The US, like many other global economies, are at the recovery stage of the business cycle. The stage is defined by diminished levels of disposable income because saving is prioritized. Enactment of policies that act as barriers to the entry of new suppliers means existing ones can set premium prices for their products and services. Therefore, there is an imperative need to ensure more suppliers are present in the market so that they can sell raw materials at lower prices. Affordability of materials is critical to the development of infrastructure needed to spur economic growth.
Bargaining Power of Buyers
The American economy is often criticized for its consumerism, which denies buyers the bargaining power. With many buyers and few suppliers, the latter has an upper hand and can set optimal prices for products and services. The challenge is significant because of the positive economic growth posited by the US. Levels of unemployment are likely to drop and increase in disposable income is imminent. More people would be in a position to spend implying an even diminished bargaining power of buyers. Considering the future scenario, one can argue that protectionist approaches by the US government are intended to give buyers some leverage. The US consumption habits are driven by demographics, class structure, and attitudes. Their purchasing behavior may not have any economic justification, hence the need to be protected from possible exploitation. However, the strategy contributes to even fewer suppliers, and the absence of price wars between competing sellers makes the buyer more vulnerable to exorbitant prices.
Threat of Substitute Products and Services
One of the problems facing the US is the high rate of unemployment. President Trump’s administration has pledged to protect the US jobs and is focused on growing the countries manufacturing industry. The protectionist policies are an outcome of evidence linking the fats drop in the US manufacturing jobs to the elimination of policies that increased trade tariffs on Chinese imports (Pierce & Schott, 2016). The strategy is informed by an understanding that the threat from foreign substitute products and services is real, and is responsible for the decline in the country’s manufacturing sector. Innovations and technological advancements in established and emerging economies have brought them at par with the US in terms of manufacturing capacities and capabilities. These countries are also looking for external markets for their products and the US is a potential destination. In some instances, the imported products prove to be economical because of the comparatively cheaper cost of production outside the US. The US undoubtedly has a skilled workforce, but it also has some of the highest labor costs globally, which potentially raises the cost of doing business. As a result, some multinational corporations selling their products in the US market have manufacturing plants outside the US, particularly in the Middle East. The objective is to cut down the cost of production in order to offer the products at a competitive price. Entry of substitute products and services disrupts the existing market forces favoring the new entrants over the existing operators. Government intervention is often necessary to correct what is deemed as market failure to strategize and anticipate external completion.
Rivalry of Existing Competitors
The health of any economy is judged by its GDP, which in most instances, reflect the balance in trade between imports and exports. The US thrives on competitive interdependence with its existing rivals. Sbragia (2010) highlighted that the situation is driven by the EU response to attempt and manage globalization in the field of trade policy. The attempts were informed by the US pursuance of FTAs in search for competitive liberalization, outflanking the EU in the process through negotiations that favored US firms in the third world markets. The EU began its own negotiating process to protect its firms. Rivalry among competing economies has the potential to shape trade policy. Initially, the US had only the EU to contend with, but the emerging economies have changed the dynamics of the playing field. The US is trapped between enacting protectionist trade policies that favor its firms and attracting hostile response from competitors on the other hand. It is imperative not to lose an existing familiar foe to an emerging rival as their partnership can be detrimental.
Conclusion
The complexity of the US government as an organization and the developments in the current global trade environment imply all the five forces of competitive strategy are at play. The fundamentals behind the forces are globalization, which has opened up markets to all players, and technological developments, which have altered the operations of the manufacturing industry through cost and process efficiency. The resulting unemployment in the US following review of trade policies with China and the integration of technology into the manufacturing sector also drives the implementation of protectionist trade policies intended to insulate US companies from global competition. The success of such policies is only dependent on the failure of rival economies to reciprocate in kind with their own punitive trade tariffs on imported US exports. While the government represents the larger agency, it is evident that the strategies founded on Porter’s five forces have direct impacts on organizational firms directly involved in business dealings. The government seeks to regulate the external environment in a manner that favors the US firms over their competitors.
References
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Pierce, J. R., & Schott, P. K. (2016). The surprisingly swift decline of US manufacturing employment. American Economic Review , 106 (7), 1632-1662.
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Vining, A. R. (2011). Public agency external analysis using a modified “five forces” framework. International Public Management Journal , 14 (1), 63-105.
Wood, G., & Wright, M. (2015). Corporations and new statism: Trends and research priorities. Academy of Management Perspectives , 29 (2), 271-286.
