NCJ Number
196299
Journal
Security Journal Volume: 15 Issue: 3 Dated: 2002 Pages: 21-35
Date Published
2002
Length
15 pages
Annotation
This article examines the effects of outside or exogenous threats on businesses.
Abstract
Business strategy usually focuses on those threats arising from within the competitive environment (endogenous), such as market positioning and competitive intelligence gathering. Threats arising from outside the market system, which include terrorism and copyright theft, are not usually taken into account. These are called external or exogenous threats. It is unwise for businesses to not address these threats because of the risks to its assets and in the longer term, policy level. The effects of exogenous/illegitimate threats on the industry analysis of the firm are analyzed by an extension to Michael Porter’s Five Forces to illustrate how security and other exogenous threats can affect the industrial context of a firm. According to this framework, the company is seen as being subject to five separate forces, deriving from the rivalry among firms within the industry; the power wielded by buyers; the power of suppliers; the threat from substitute products; and the threat from new entrants to the industry. Porter’s Five Forces Model is used to break down the elements of the environment in which a company’s strategy is developed. The factors affecting the strength of the various threats or forces in Porter’s Five Forces are suppliers, buyers, substitutes, new entrants, industry rivalry, and exogenous threats. The effects of exogenous forces are two-fold. First, they affect the strategy directly, in the same way as if they were a substitute product or a new entrant affecting future competitive advantage. Second, the presence and nature of the exogenous forces will affect the importance and intensity of the other forces within the model. A terrorist action (or the very threat of one) can reduce the attractiveness of a product or service just as much as a competitor’s improved offering. The present framework, a natural extension of the Five Forces Model, allows the accommodation of these exogenous factors. By using the expanded framework to make sense of the environment, businesses can be alerted to those aspects of the environment that threaten them, not at the operational level but at the strategic planning level of the company. 2 figures, 3 tables, 29 notes