An Analysis Of Porter's Five Forces In The Porter

Porter’s Five Forces (1980), named after Michael E. Porter, is a critical framework to access the level of risk and degree of potential profitability of each industry in which firms are competing. Specifically, five forces are shown in Figure 1, are includes competition between rivalry, potential of new entrant, threat of substitute products, and pressure on bargaining power of suppliers and customers.

Porter has identified five (5) competitive forces that shape every industry and every market. The forces determine the intensity of competition and hence the profitability and attractiveness of an industry. Based on the information derived from this analysis, management can decide how to influence or to exploit particular characteristics of this industry.

the two largest firms Coles and Woolworths account for 80% of total sales of groceries in Australia. With this mush market share market distortion is created and a supplier who has to deal with someone with that much power works from a weak position. In an oligopolistic market competition is intense. Both non-price and price techniques are used to compete. The warranties and tricky advertisements are common aspect. In oligopoly mutually interdependence is a must. If policy of price change is adopted by one, then this will affect the sales of other firm in the market.

There is a market trend of supply and demand in an economy and this is measured through the equilibrium process and the actors that affect supply and demand. The farmers are the market suppliers and hence they determine their produce by measuring the equilibrium market prices and quantities. The suppliers are aware that when the prices of commodity increases the demand of the same commodity decrease and when demand increases supply decreases until the market reaches an equilibrium point. There are various factors that affect

Woolworths and Coles would have agreements with farmers to supply exclusively to them, in exchange for the firm purchasing all of their quality produce. Woolworths and Coles are also more likely to be able to purchase products, including fruit and vegetables, for a cheaper price than small, independent sellers, as they are purchasing in bulk. According to McKenzie (2002) "No major supplier, no matter how big or powerful they are, can afford to be offside, or out of favour, with Coles or Woolworths".

c. How consumers maximize utility, and how prices are established in markets for agricultural products

Porter’s Five Forces is defined as threats of new entrants, bargaining power of suppliers, power of buyers, the threat of substitutes and rivalry among existing competitors. New entrants into the industry aim to gain market share from rivals, so the intensity of competition may require to make changes on current strategy of marketing to maintain existing market share. The bargaining

For instance if the grapes or having a good season and there is an unlimited amount of quality grapes then the bargaining power will rely with the buyer, hence the bargaining power of suppliers will be low for this particular season. However if the weather is not cooperating during the growth and there is a limited amount of grapes available to the buyer than the bargaining power will lay with the supplier and will be assessed to high for that season. Therefore the bargaining power of suppliers can change from season to season depending on the availability of quality grapes. It is also important to point out the bargaining power of supplier will also vary with the kind of wine produce, one kind of grape needed for a particular kind of wine can be abundant but another type of grape needed for a different type can be scarce. A good knowledge of the industry and weather can help a wine producer better manage the uncertainty of the bargaining power of suppliers from season to season. Vincor as tried to minimize the bargaining power by having owning their own vineyard and wineries so they supply their own grapes however they still buy 35% of their needed grapes from suppliers.

With this in mind, buyers, e.g. supermarket chains, having strong bargaining power are switching between substitute products with only low switching costs and tend to buy their products from suppliers offering lower rates. As demonstrated by Barney (1991; 1995) the final step in the external environment analysis is the competitor environment which casts light on competitor’s objectives, assumptions, capabilities and strategy. Only with thorough understanding and interpreting of competitors’ actions, a firm can successfully compete against its rivals and create higher value for customers. When analysing its competitors and their trends, DSF should have seen that most of its competitors are multinational companies which control a great share of the foods industry and seek above average returns from imported and lower priced goods.

The number one strategic issue for Chipotle is continuous and cost-effective supply of organic and ethical ingredient’s. It is recommended that Chipotle should develop stronger relationship with suppliers. It can do so by personalizing the relationship and by doing business with suppliers who share the company’s vision. Chipotle can also involve suppliers in its business to motivate them. For instance, Chipotle can offer stock options to suppliers in Chipotle or it can launch a product together with the supplier so that the supplier is as invested in Chipotle’s success as Chipotle.

The grocery industry in the United States is currently an attractive industry (a.k.a. profitable). This attractiveness derives from the relative low threat of new entrants, low supplier and buyer powers, and low threat of substitutes. The main factors driving these results are the low concentration of suppliers and buyers, the significant barriers to entry due to high up-front investment costs (for infrastructure and distribution channels) and scale economies, low availability of substitutes, and the threat of retaliation from

In his article “The five competitive forces that shape strategy“, Michael Porter (2008) updates and extends his “five forces” framework he first introduced in 1979 and which has influenced the academic and business research for decades. He reaffirms that “THREAT OF ENTRY”, “THE POWER OF SUPPLIERS”, “THE POWER OF BUYERS”, THE THREAT OF SUBSTITUTES”, and “RIVALRY AMONG EXISTING COMPETITORS” are the forces that shape every single industry, and a thorough understanding of such forces help analyze everything from the intensity of competition to the profitability and attractiveness of any industry. The framework has two dimensions; the vertical dimension that connects

The bargaining power of buyers can force the supply companies to lower the prices. In a market in which buyers have the power,

The grocery market and natural-food retail chain that is being represented can be explained though the Porter’s 5 Forces Model because it has categories that are important when describing any industry. Porter’s 5 Forces include supplier power, buyer power, established rivals, new entrants, and substitutes and these can all be used to describe how profitable a firm will be in the industry. Supplier power in this market is high because of the uniqueness of goods. Buyer power in the market is low due to consumers willing to pay more for the niche natural-food goods as opposed to conventional-food goods. There are ample amounts of competitors in the market making profitability harder to obtain, but not impossible. The market for natural-food retail and organic food has been impacted by regulation and certification making new entrants into the market harder to achieve and making it a low chance of new competition. Threats of substitutes in the market is also a low because of the unique organic and natural products that are produced and sold.

I am a registered nurse employed in a hospital in the healthcare industry. Porter’s five forces model begins with the first force being the intensity of rivalry among incumbent firms (Parnell, 2014). Competition in healthcare, particularly hospitals, is limited. Due to the accredidation process, government regulations such as a certificate of need (Certificate of need, n.d.) and licensing of facilities and providers, competition is limited. The Federal Trade Commission (FTC) is looking at ways to increase competition in healthcare such as opening up opportunities for nurse practitioners, increasing the availability of such technologies as telehealth and establish more competitive healthcare pricing. In cities, there is more of a concentration of competitors. The hospital that I work at is the largest between Memphis and Nashville and has the busiest ER in the state of Tennessee. Therefore, the concentration of competition is low for that particular hospital. There are high fixed costs with a hospital such as buildings, overhead, equipment, and salaried personnel. Yet, a hospital does not cut their prices to increase patient census. However, it could be questionable in a low census period as to whether there are additional tests run or hospital admissions that would ordinarily not happen if the census were higher. There is strong growth in the healthcare industry with the industry growing at twice the rate of the national economy (Health Care Industry, 2012).