Porter’s Five Forces, Politics, Power and Brand Anna (9)

If team Anna wants to pass the Jan Lokpal Bill they must first contest elections. Laws can only be made in Parliament not on Ramlila Maidan

The above sentiment was echoed by many members of Parliament. It struck me as to why did they say that? This could not have been proverbial ‘slip of tongue’ or ‘off the cuff remark’. Probably hidden truth in this statement is that people interested in ‘upsetting the present equilibrium’ cannot cross over to the corridors of power because of some kind of ‘entry barriers’ imposed and institutionalized by the present day political system. Here I try to figure out.

 

 

Amongst many contributions made by Michael Porter in developing understanding of competition, one framework is five forces model. It explains how forces influence industry profitability or capacity to generate surplus. If we assume that politics is an industry then the above statement certainly implies a position of privilege , which cannot be ‘disturbed’ by a new entry (Firm Anna) because of the obstructions imposed by these forces. People inside the industry are able to ‘gain control’ over the industry by creating an ‘advantage’ which is ‘sustainable’. It indicates presence of ‘mobility barriers’ which do not allow ‘mobility’ of the challenger (Anna) in the industry.

Let us look at these forces:

Threat of new entrants:
Can an ordinary person make a swift entry into politics? Probably the answer is negative. Consider the barriers to entry and how these work in favor of incumbents: 1. absolute cost advantage (relative superiority of cost of production) is hugely skewed in favor of incumbents. Two driver of this are economies of scale (parties operate on a large scale in terms of seats contested) and experience curve effects (the regulars have learnt the ‘tricks of the trade’). Second access to inputs necessary to contest elections is beyond the reach of an ordinary citizen (very specialized team of skilled and motivated workers and logistics). Third is the capital required to participate which works out very huge for an individual (anywhere in between 10 to 15 crores). Final factor is competitive retaliation- a new entrant is not expected to go ‘unnoticed’ and is certainly likely to invite strong ‘fight back’ response.

Buyer Power:
On the surface buyers seem to be powerful because they can easily switch the supplier. Take a look closely. Buyers enjoy pseudo power. Consider the factors. First and the foremost determinant of buyer power is ability to switch but the set of available alternatives are almost similar (switching does not yield better outcome). Second, buyer can draw power from the ‘volume of purchase’ but here one buyer means just one vote. Third, buyers can be a ‘countervailing force’ if they are ‘concentrated’ which they are not. Forth, informed buyers are powerful but they are not in our case. And finally a buyer does not have option to ‘integrate backwards’ to become producer and consumer.

Threat of Substitutes:
Threat of substitutes intensifies competition with in an industry and significantly challenges profitability. Here is an industry more or less devoid of the threat of substitutes. The price-performance between the substitutes is not significant (this is echoed in the sentiments ‘all are same’). The outcome generally is the same (that is the reason why many people do not participate in the election process). Secondly, political maneuvering and mechanizations systematically reduce inclination to switch (stultifying intelligence and objectivity and stirring emotions by way of caste or religion, mannerism or some other variables).

Supplier power:
Supplies for politics come from different ‘interest groups’ (business, religious etc) to get a ‘say’ in the corridors of powers. In some cases the suppliers depend on politics for ‘survival’ (favorable policies) not the other way round while in others cases these demand ‘perpetuation of ideology’. The bargaining power of suppliers is limited because supplier either could be switched easily without any cost (more suppliers and substitutable inputs) or suppliers are dependent on a particular party or group.

Outcomes

These five forces determine competitive rivalry. When these five forces are powerful, firms ‘improve’ and ‘innovate’ to reverse their effects. In our context these forces are ‘powerless’ therefore change is slow to come by. Firm Anna is nothing but stimulus to disturb so called political equilibrium. It seeks a change for the betterment of masses. It seeks to empower the powerless. It is new firm making an entry in an industry in which these five forces are adversely placed.

That is the reason why some members of Parliament insist that Anna should first contest elections because the outcome is obvious to them. But now Anna has reversed the equation.

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8 thoughts on “Porter’s Five Forces, Politics, Power and Brand Anna (9)

  1. Team Anna is a new entrant facing all the threats but The opposing tactics of the Government will not last long because there is an end to every wrong doing.
    Interesting comparison of the Anna movement with Porter’s five forces!

  2. Anna Hazare had supported Lok Bharati Party, a part of the coalition of 16 parties led by RPI(A) leader Ramdas Athavale in the last Maharashtra Assembly elections. How and why he chose to start opposing parliamentary democracy can best be explained by him.

  3. Are suppliers and buyers not the same with respect to the industry specified here, they take from masses and produce the same for the masses.
    Also here could Narendra Modi play a srong substitute?

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