Applying Porter’s Five Forces of Completion Model, Asses the Nature of Competition in; the Fine Fragrance Industry and the Retailing of Fine Fragrance Industry

The following analysis of Porter’s 5 Forces Model will help in determining the threats that my be present now or in the future and help determine opportunities and decisions regarding the marketing plan.

Substitutes: The threat of substitutes is high. The threat of online apparel stores has the potential of destroying the traditional retail industry business model (Bandt, 2000). The ecommerce platforms allow retailers expand their consumer base across national and global markets with lower capital requirements and improved efficiency.

Competitive Rivalry As you study the model, you will see that the rivalry is the component that all the competition and their threats centers around. Please describe this for Company G.

The Intensity of Rivalry among Competitors in an Industry (High): Equally balanced competitors exist within the industry such as BCF and KMD; these firms also face competition from retailers and wholesalers. The growth of the industry is relatively agile in both financial and technological aspects. The intensity or rivalry is further accentuated by relatively high storage and fixed rental costs, extensive product differentiation and minimal switching costs.

Low product differentiation and economies of scale: There isn’t much product differentiation at play in the retail industry as there are well known manufacturers whose products are offered for sale, which leaves price to compete on. Current well established retailers with thousands of stores enjoy the economies of scale to control their cost that a new entrant might not be able to replicate after immediately entering the industry.

Threat of Substitute Products and Rivalry Among Competitors- these two forces are closely related. In marketing, the word “product” means more than a good, service or idea. Product is a broad concept that also encompasses the satisfaction of all consumer needs in relation to a good, service or idea. All planning strategies have the goal of creating a sustainable competitive advantage in which other companies simply cannot provide the same value to their customers that the firm does, no matter how hard they try. When a national chain retailer has a competitive advantage with a product, it must take steps to safe guard that product to stay different and unique in the marketplace. For example, Macy’s is the exclusive retailer for Martha Stewart home lines and is currently in a legal battle with JCPenney who announced that they will carry that line as well.

The Five Forces Model as defined by Dr. Michael Porter of Harvard University uses five different strategic factors to explain Competitive Rivalry a company or industry faces. The fiver forces that comprise the model are Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitute Products, Potential Entrants and Completive Rivalry (Porter, 2008). The intent of this analysis is to rank-order each of these five factors from the standpoint of their influence on Target Corporation (NYSE:TGT) and their competitive position in the retailing industry. Each of the five forces are rank-ordered in terms of their importance to Target.

Buyers pose a credible threat of backward integration. pg. 218 (e.g. one of Holey Soles distributors had set up its own company and was selling poor versions of the shoes.). Hence it’s a possible threat in the industry. Medium to High.

The competitive forces that shape company strategy are very important to consider in any organization. However, they are especially important when an organization’s forces fall closer to the “intense” side on the scale between “intense forces” and “benign forces.” “Almost no company earns attractive returns on investment” when forces are intense, like those in industries that sell luxury goods. (Porter, 2008). Yet, Robert Mondavi’s wineries have leveraged the five forces (barriers to entry, bargaining power of suppliers/buyers, threat of substitutes, and competitive rivalry) in order to maintain consistent profits. The five forces are discussed in detail below with the level of importance increasing throughout the descriptions.

As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to

Competitive rivalry exists between companies with the same or similar products/services and similar markets. Factors to be considered include:

Porter’s five forces analysis is a tool is useful for us to analyse the threat of competition in an industry. Porter believed that the industries were influenced by five forces; competitive rivalry, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and the threat of substitutes. Analysing these areas can allow you to see attractiveness of the market and find a competitive advantage.

The average general supply and average population of supplier’s gives suppliers’ substantial but finite bargaining power on companies like Ford. Plus, many of the suppliers have low forward vertical integration, meaning that they have no stake or controlling power on the dispersion and selling of their products to Ford. The suppliers bargaining ability becomes even weaker due to Fords backward vertical integration by the Ford River Rough Complex. Through the Complex, Ford makes several materials it uses to make cars and colligated completed products. This suggests that Ford needs to understand the substantial but finite outside factors connected with its supplier’s effect on the company.

Porter’s five model is defined as the framework that evaluate the position of a company in the external environment with focus drawn on the level of competitiveness (Roy 2011). The framework considers factors such as rivalry, substitute goods, the power of suppliers and buyers as well as new entrants. Four forces can influence the success of Michael Kors. The first one is competitive rivalry. Here, the struggle is about maintaining performance despite different tactics used by different companies to increase sales. For instance, Ralph Lauren uses premium prices for quality products to differentiate itself, while Coach uses product variety within the line of handbags to remain competitive (Stewart 2016). Also, when the industry is flooded with similar companies producing similar merchandise, the probability of a company stagnating is high because consumers have a variety to pick from. Hence, the need to establish loyal customers.

Porter’s Five Forces model is used to evaluate the degree of rivalry between competitors in a given industry through assessing the four forces that lead to this outcome. These forces are the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products.