British American Tobacco

British American Tobacco

Introduction

As part of the analysis of the industry in which the company operates fits the model of the five competitive forces, also known as Porter's model of competition or enlarged. It explains the firm's position in a particular sector. The aim of the model is to identify and analyze the forces that reduce the long-term viability of the company, so that you can fight. According to this model, there are five forces (hence the model name) that determine the structure of the industry and affect its profitability.

Discussion

The stronger these forces, the lower the capacity of existing enterprises in the sector to raise prices and increase profitability.

These are the five forces:

Direct competitors

Bargaining power of suppliers

Bargaining power of customers

Threats arising from the entry of potential entrants

Threats posed by the producers of substitutes

The direct competitors are companies that offer on the market, the same type of good or service offered by the company. The manufacturers of replacement assets are those that produce goods other than those placed by the company on the market, but which meet the same needs of the customers. The characteristics of the sector in which the company operates determine the 'intensity of competition and profitability.

Power Of Suppliers

Suppliers and customers hold a bargaining power. Suppliers are those to which the company is directed to buy the raw materials, ancillary materials and semi-finished products required for the production process. The bargaining power of suppliers depends, among others, the size of the firm relative to suppliers, the presence and relevance of substitute products purchased by the company from incurring the costs of moving in case of purchase from other suppliers, the possibility of integration upstream from suppliers, the availability of adequate information by the company (George & Jones, 2005). Reference should also be present price sensitivity, economic conditions and financial, the cost of acquisition over the total cost, product differentiation, competition, the importance of the quality of the product.

Power of Customers

Customers are those who buy the goods offered enterprise. The same bargaining power is possessed by customers. It depends on the size of the company to clients, by the presence and relevance of substitute products purchased by customers from incurring travel costs in the case of purchase by other companies, the possibility of integration downstream from the customers, the availability of provide our clients with adequate information. Also in this case, you must also keep presents the price sensitivity of the customer, its economic conditions and financial, the cost of acquisition over the total cost, product differentiation, competition, the importance of the quality of the product.

Threat of Substitute Products

The price the buyer is willing to pay depends in part on the presence on the market of products substitute (Doole & Lowe, 2008). It will be necessary to keep in mind, the propensity of the consumer to replace the product and the relationship between price and quality of substitute products. The more favorable the ratio, the greater the threat posed by the presence of substitute ...