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Posts Tagged ‘Porter’s Five Forces’

marketplacePreviously, I discussed the first two of Michael E. Porter’s five forces which he suggested were essential for analyzing whether the marketplace environment would work favorably for a business or against it.  If you did not read the first post on this topic, then you may want to read it first. (You can find the link just above this post.)

And for those who did, you’ll remember that the first two forces and the questions they raised were as follows:

1.    Threat of New Competition:  Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry.

Question: Is the proliferation of new church plants simply covering up the fact—perhaps even contributing in a strange way—that Christianity in the U.S. particularly is declining?

2.    Threat of substitute products or services: How easy is it for the buyer to switch to a different product? The easier to switch, then the more likely to switch and make your organization less profitable.

Question:In an attempt to be relevant and more accessible, are Christian churches becoming less differentiated, therefore, more susceptible to our “customers” switching to alternatives?

Now we are ready to move on to the last three forces recognized by Porter:

3.    Threat of competitive rivalry: “Rivalry occurs because one or more competitors either feels the pressure or sees the opportunity to improve its position. The actions of one firm are felt by others who then retaliate. Retaliation can take the form of price competition, advertising competition, changes to the distribution or other means” (Cafferky 13). Lip service is often given among churches and religious organizations to the belief that “there is no competition among lighthouses.”  How would your congregation feel if another Christian church started a new plant with a charismatic leader across the street from your site? I know that our churches see the fact that young families are leaving to go to community churches as a reason to make huge changes in our traditions. Have you noticed the rise in TV advertising for Christian churches?  Did you see Lou Holtz, former football coach at Notre Dame, calling Roman Catholics back to their church, during the BCS Championship game?  Some of this advertising is directed toward the people we call Seekers, but here is my question: If we are brutally honest, would we admit that the size and strength of our congregation or our fellowship or our denomination is our primary means of measuring the growth of the Kingdom and that we see the growth of other Christian expressions as competition?  And, secondly, if there is any truth in the previous statement, is responding to that threat of competitive rivalry replacing our commission to seek and save the Lost?

4.    Bargaining Power of the Customer (Buyer): The ability of the customer to put the firm under pressure or change its marketplace behavior. “The church’s products are perceived as being standard or undifferentiated, switching costs are low, and buyers pose a credible threat of backward integration or for creating their own substitutes for the values offered by religious organizations” (Caferky 21). A for-profit firm can alter buyer power by attempting to lock buyers into an agreement, by differentiating the product and/or buyer selection. On the surface, this force seems to be an overlap with the previous ones. Very subtly, however, it gets to an issue with which many of our churches are struggling: who is really in control of the church?  Are churches “customer” driven, are they “leader” driven, or are they “divinely” driven?  And to what degree are these different drivers congruent/divergent with/from each other?  Customer-driven churches are seen as market-driven, which is sometimes understood as both good and bad.  Leader-driven churches are seen as hierarchical at best and dictatorial at worst, and divinely-driven churches are perceived as everything from other-worldly to mystical to cultish to fundamental. The current marketplace seems to favor customer-driven churches, but my question is: are customer-driven churches in danger of no longer preaching a message that produces “new creations,” that is, where the “old man” is put off, replaced by the “new man?”  Porter’s framework would argue that the more susceptible our churches are to “buyer power,” the less likely they are to “succeed.”   I don’t think we really believe that.

5.    Bargaining Power of the Supplier: The ability of those who supply the firm with essentials to influence its behavior. Cafferky argues well that for churches, these “suppliers” are “charismatic celebrity visionaries, religiously affiliated institutions of higher education, professional associations, denominational leaders, congregational members, organizational founders and, even secular influentials in the wider culture” (23).  Where any of these forces are stronger than the firm itself, he argues, the firm’s strategy/behavior will be under pressure to yield in ways that tend to make it less successful. Because this is so similar in principle to the previous force, I don’t see the need to expand further. Perhaps the real question is what is motivating your church? When you discuss changes—or no changes—among yourselves, from where do your evidences come? Do they come from your “consumers” or from your “suppliers”? And to what degree?  Is your church completely dominated and driven by outside market forces?

There are no answers in Porter’s Five Forces for Analysis; there are only questions to raise? Porter has suggested only a framework for analyzing and evaluating. However, the analysis should lead to conclusions about the way your church “does business.”

Sometimes putting a picture into a new frame really helps us see the picture differently enough to truly re-evaluate. I’ve tried to raise a few of the questions about how we do church, really just to stimulate your thinking.

I’d love to hear your questions or your conclusions.  Seeking first the kingdom of God is where our hearts are, and our prayer is for wisdom.

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marketplaceOur daughter is currently enrolled in a Masters degree program in Organizational Development, where she is learning how organizations tend to function, both successfully and unsuccessfully.

Her primary “business” experiences have been with Church–as both a member, the daughter of church leaders, and now the wife of a church minister—and Let’s Start Talking, a non-profit, faith-based organization that she has grown up with, volunteered for, and been employed by.  Because of this, her interest in this degree program is primarily in developing as a person so as to be able to help both churches and ministries like LST.

Sherrylee and I love that she is doing this because she is constantly sending us books and articles from her reading list that she feels might be important to us and/or to LST.  Recently, she sent us a paper by Michael E. Cafferky, presented in 2005 at a Christian Business Faculty Association conference, entitled “The Porter Five-forces Industry Analysis Framework For Religious Nonprofits: A conceptual analysis,”  a paper which introduced me to several new ideas.

Very briefly, I would like to share with you my thoughts from reading both the paper and other articles to which it led me.

In 1979, Michael E. Porter of Harvard Business School introduced a framework of five forces which he believed would describe the attractiveness/profitability of a market. At first, it was assumed that churches and non-profits seemed to work outside of a competitive framework, so for many years his model was assumed inappropriate for a religious marketplace.

Professor Cafferky’s paper, however, challenges this assumption and looks for intersections and congruities. I believe, at the least, the exercise of using Porter’s Five Forces Analysis could stimulate churches and religious non-profits to examine the dynamics of their own environment in a more productive way.

Let’s look at these Five Forces and try to raise specific questions about the current religious marketplace:

1.    Threat of New Competition:  Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. We recently did a search around our new office facility and found 74 churches listed within a five-mile radius.  Church planting is currently seen as the primary means of evangelism in the industrialized world, especially within the United States. The proliferation of house churches, often the strategy for new church planters, should be noted in the context of “new entrants.”  In contrast to all of these churches and all of these “new entrants” is the fact that around 4000+ churches close their doors permanently each year and the number of people who self-identify as Christians in the U.S. is declining.  Here is my first question: Is the proliferation of new church plants simply covering up the fact that the religious marketplace is much less “profitable”? To use the language of business: are we closing old stores and opening new stores, but that strategy in and of itself is not adequate to keep our business profitable?

2.    Threat of substitute products or services – how easy is it for the buyer to switch to a different product? The easier to switch, then the more likely to switch and make your organization less profitable. The ease depends on differences in cost, in quality, in availability of substitute products, and perceived differentiation among other things.  It seems to me that especially the evangelical churches have been rushing towards similarity!  Worship, jargon, buildings, services and community-building has gradually become one cloth. Doctrinal differences are held in low esteem and will likely disappear in the coming generation of young preachers in churches of Christ.  Post moderns come with very little propensity toward brand loyalty anyway, so switching within the American church context is extremely easy!  As the United States becomes more secular, the cultural pull toward syncretism will make even non-Christian alternatives more similar, therefore, more magnetic. My question: In an attempt to be relevant and more accessible, are Christians becoming less distinctive, therefore, more susceptible to our “customers” switching to alternatives?

3.    Intensity of competitive rivalry

 

(to be continued . . .)

 

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