CASE STUDY

ASOS case study



Apply Michael E porter 5 forces and competitive advantage to the ASOS case Study

The model of five competitive forces of Porter is a tool for strategic analysis of the competitive environment of ASOS. The author, ME Porter, on the assumption that the “performance” of the company depends on its ability to confront, influence and resists the pressures is a competitive environment. Indeed, the main objective of a business must be to obtain a competitive advantage in its market, which ultimately is measured by its ability to generate profit (performance). This model aims to identify the forces in the competitive environment of the business of ASOS and their intensities, to adapt its strategy to gain competitive advantage and thereby to make profits above the industry average (Porter, 2008).

The five competitive forces of Porter

Michael Porter has identified five types of forces that can be exercised more or less intense in the industry. The diagram below shows the initial model:

Five forces model focus

These forces are carried by groups of actors (potential new entrants, substitute products companies, suppliers, customers and direct competitors) that influence the intensity of competition in the industry observed. The analysis and prioritization of the influence of these groups of stakeholder should help identify key success factors (CSF) to control for competitive advantage. The analysis allows evaluating the attractiveness of an industry and the key success factors that a company must master to succeed. Here is a slightly more detailed presentation of the 5 forces:

The threat of potential entrants is determined by the size of entry barriers in the industry. Indeed, markets have a number of obstacles that do not facilitate the entry of a new business. Here is a list of the main types of barrier to entry that may exist:

Economies of scale that force is to act immediately on a broad scale or to bear a cost disadvantage

Product differentiation and hence the heavy investment in marketing to realize that it will undermine customer loyalty

Capital requirements, especially if they are devoted to unrecoverable expenses (e.g. advertising launch and R & D)

Access to distribution channels

Cost disadvantages independent of a size that may result from the effect of experience, proprietary technologies, access to scarce resources or limited, favorable locations, etc (Rainer, Turban, 2009).

The threat of substitutes is the fact that a consumer need can be met by several alternatives (products or services). Thus, the car can be a substitute for a trip by train or plane. The threat that force is even greater:

Transfer costs incurred by clients are low

The price / performance is similar (Rainer, Turban, 2009)

The bargaining power of suppliers is their ability to influence the industry in terms of price and quality of products or services they provide. Indeed, a pivotal supplier may impose higher prices if demand is weakly price elastic. Their bargaining power is much larger than:

Costs of switching are high or prohibitive

There are substitutes available

Supplier industry is enormous

They represent a significant share of purchases of the company (Rainer, Turban, 2009)

The bargaining power of customers ...