Porter’s Five Forces Porter’s Five Forces identifies and analyzes the forces that shape every industry permitting the determination of an industry’s weaknesses and strengths. The following paragraphs rank each force for the household products industry as strong, moderate or low. Buyer (Customer) Power: Moderate Buyer power relates to the relative number of buyers in an industry and the leverage buyers have with respect to price. Buyers with strong bargaining power can extract price concessions and demand a higher level of service and delayed payment terms.
Lower buyer power is better for the firm. There Is limited product differentiation within this market, In terms of technical specification. This tends to increase buyer power. Although brand awareness Is high, customers tend to be more Interested In the quality and specifications of Individual products, and customer loyalty Is therefore relatively low. Supplier Power: Moderate Supplier power relates to the relative number of suppliers in an industry and the leverage suppliers have with respect to prices.
The majority of components used in he manufacture of PC’s display minimal differentiation between suppliers and, in order to reduce costs, are often sourced from companies operating from low cost manufacturing regions. Overall, some suppliers have a large control over the market, such as Microsoft and Intel, there are many other components needed in PC manufacturing that can be obtained from multiple companies which allows manufacturers much more choice in other areas, balancing out supplier power. Threat of New Entrants: moderate New market entrants Increase competition.
To the extent that companies develop arrears to entry or economies of scale, they are able to mitigate the risk of new entrants. On the whole, customer loyalty to specific manufacturers is relatively low One exception is Apple, which has a strong brand image. Industry Competition: Strong Rivalry among existing firms will impact operating results. The greater the industry concentration, the lower the competition between existing rivals and the more profitable the firms will be. The major PC manufacturers are all relatively large companies but some are very large international corporations.
Such a large range of genuineness have an interest in this sector that rivalry is strong; companies compete for new markets and increased market share with numerous other competitors. Threat of Substitutes: Strong The greater the threat of substitutes the less power the seller has to raise prices or pass on costs to the buyer. Fewer substitutes are always better for the firm. In recent years, the threat of substitutes within the PC market has increased significantly as technology has advanced. One of the largest threats to the consumer PC market is constituted by smoothness.