Figure 11. Porter’s five forces framework describing market competitive conditions

understanding of what drives the demand for skills, it thus warrants a closer look at the relationship between the competitive conditions of the market and the value add strategies.

3.2.1 Market competitive conditions To describe the market competitive conditions, Porter (1980) developed a “five forces” framework. In it, he identified five competitive conditions (or “forces”) that formed the “rules” of market competition, which in turn would determine the attractiveness of the industry for long-term profitability. An illustration of the five forces is shown in Figure 11.

Accordingly, in the survey, we adopted this five forces framework to describe the extent of market competitiveness. The respondents were asked to rate on a 3-point scale, where 3 means “more competitive” and 1 means “less competitive”:

o the extent to which price competition was used in their industry; o the ease with which new firms can enter and compete in their industry; o the extent to which their products and services were threatened by substitute products and services; o the level of bargaining power that the establishment had over their suppliers; o the extent to which their customers could influence the prices, quality, and design of the products and services.

Threat of new entrants

Bargaining power of customers Price rivalry within the industry Threat of substitutes

Bargaining power of suppliers

These five items corresponded to the five competitive conditions of price rivalry within the industry, threat of new entrants, threat of substitutes, bargaining power of suppliers, and bargaining power of customers respectively. Figure 12 shows the response distribution of the above questionnaire items. The variables have been standardised in the following analyses.