1. Porters 5 forces Analysis:
1.1 Buyer power:
The buyers for mining industry usually have medium to high power. There are two elements that could affect the buyer’s power. One is buyer’s level of negotiation; the other is buyer’s price sensitivity. In our case, the two companies are producing coal and uranium. These two products are mainly used for producing electricity. Buyers for these natural resources must have large quantity of demand, and also they usually have government behind them for negotiation. Even through these natural resources are unrenewable and limited, there are other mining companies producing them and these resources are undifferentiated from other companies products. This makes the buyers have high
…show more content…
1.3 Rivalry among existing firms:
The competition of mining industry is medium to high. One major competition for mining industry is the competition for resources and mines, which is different from other industries. Since the resources are limited and unrenewable, together with the continues increasing demand for energy, such as coal demand of China and India, the battle of exploiting and developing new mines are intensive. Also, there are many competitors in the industry. However, since the exit barriers are high, the competition is limited within the existing companies. Companies in the industry might battle for larger market share but facing little threat of new entries. Thus, the competition in the industry is concluded as medium to high.
1.4 Threat of new entrants:
New entrants may pose a threat to the company by introducing new innovative products at a competitive prices and eating into their market share and customer loyalty. The threat of entry for the coal and uranium industry tends to be low due to high entry barriers. The reason for this is the government regulations and restriction on coal and uranium mining companies. Resources of coal and uranium are laminated. The capital expenditure or set up of mining company is very high. Moreover, mining companies has a high exit cost and that because the use of specialized asset. Also,
Both potential and existing competitors influence average industry profitability. The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents’ position (Porter, 1980b; Sanderson, 1998) The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:
Market entry strategy involves the essential requirement for a company to get into international level. The need of involving other companies whereby two companies join together is referred to as joint venture entry. They get into a similar market and make the same production with the aim of sharing risk and at the same time they share the profit according to their terms of agreement (Kretzberg, 2007). Therefore, Lincoln Electric Company has a chance to join with other company to venture in the Indian market.
The market greatly depends on how powerful buyers are in terms of their willingness to pay certain prices. The following determines the bargaining power of buyers
If suppliers are limited, they have a greater opportunity to charge higher prices for raw materials, and they may also pose a threat of forward integration to the industry. Similarly, if an industry has few buyers, or buyers can cheaply and easily change suppliers, they can make demands for less expensive higher quality products, causing impact to profit (Porter, 2008, p. 83).
The power of buyers in the industry varies at different levels depending on the field. For pharmaceutical drug companies, which have thousands of patients, customers have lower price sensitivity as they are rarely able to refuse the treatments they need and they have low bargaining leverage due to commonly lack of information as well as knowledge on the drugs. For biotech firms that distribute specialized products to the government and hospitals, their customers actually have more of a bargaining power due to being the sole consumer sources
This paper addresses the use of Porter’s Five Forces model and how it can benefit Broadway Cafe by identifying and analyzing the effect of these forces on its business. The benefits include improved decision making, faster time to market, better productivity, improved competitive advantage, more profits and greater customer satisfaction. It also helps in achieving operational excellence.
Buyers have more power when they are large-volume buyers, the product is a significant aspect of the buyer's costs or purchases, the products are standard within an industry, there are few switching costs, the buyers earn low profits, potential for backward integration of the buyer group exists, the product is not essential to the buyer's product, and the buyer has full disclosure about supply, demand, prices, and
Existing Competitors. Rivalry among competitors within an industry use price discounting, new products, marketing, and other techniques to be competitive. Profitability of an industry suffers from high rivalry. The intensity with which companies compete and the basis on which they compete determine to which degree rivalry brings down an industry’s profitability (Porter, 2008). Pure competition is considered by economists as a competition with a high
The bargaining power of buyers is affected by the concentration and number of consumers, when buyer power is strong, they gain the power to choose between producers and ultimately equip themselves with bargaining power which then the producers will have to conform to in order to produce profit, under these conditions the buyer has the most influence in determining the price of products. Also when buyers have strong bargaining power in the exchange relationship, competition can be affected in several ways. Powerful buyers can bargain for lower prices, better
If an industry is profitable, it will become a magnet to attract more competitors looking to do same business with us. If it is easy for these new entrants to enter the market, this poses a threat to the firms already competing in that market. Threat of new entrants is one of the forces that shape the competitive structure of an industry (Marc, 2014). A high threat of entry means new competitors are attracted by the profits of the industry and can enter the industry easily. New competitors entering the marketplace can make the market share and profitability of existing competitors more threaten cause the existing competitor to make some changes to existing product quality or price levels. A high threat of new entrance can make an industry more competitive and decrease profit potential for existing competitors whereas a low high threat of new entrance can make an industry less competitive and increases profit potential for the existing
Businesses are not only faced with competition within the industry they operate in. They also face competition from businesses in other industries.
Coal, a mineral I have discussed previously, is necessary to our everyday lives. Coal is an incredible source of energy; it heats our houses and buildings, and also fuels stoves. You may often wonder where this extremely useful mineral comes from. Coal does not just appear; it needs to be mined through a process which results in our being able to utilize it. Coal mining is fairly inexpensive, is carried out on a large scale and can be mined in either underground or surface mines.
Bargaining power of suppliers is low due to large number of suppliers of raw materials, low switching cost and availability of attractive substitutes. (Jim Wilkinson, 2013) Therefore, we could control the price of raw materials because we can easily switch to different suppliers with lower price and higher quality, increasing our profit consequently.
Industrial psychology is concerned with people at work. It is also called personnel psychology. A closely related field is known as organizational psychology. Traditionally, industrial psychologists have assessed differences among individual workers and have evaluated individual jobs. Organizational psychologists generally seek to understand how workers function in an organization, and how the organization functions in society.
For example the competition for a laptop manufacturer may not only come from other laptop manufacturers but also from two wheelers, refrigerators, cooking ranges, firms offering saving and investment schemes like deposits and issuing shares or debentures, etc. Thus, customer has many choices for investing his income. Such kind of competition is known as a desire competition when the competition among such alternatives which satisfy a particular category of desire and it is very high in the countries with limited disposable incomes and many unsatisfied