MARKETING

Procter and Gamble - Porter's Five Forces Model

Table of Contents

Introduction1

Supplier power2

Buyer power2

Competitive rivalry2

Threat of Substitution2

Threat of New Entry3

Beauty and personal care - P&G3

Supplier power3

Buyer power4

Competitive rivalry4

Threat of Substitution5

Threat of New Entry6

Conclusion7

References8

Procter and Gamble - Porter's Five Forces Model

Introduction

The porter's five forces model is one of the most important models in marketing used for a comprehensive industry analysis. The model was given by marketing guru Michael E. Porter in the year 1979.

This may be understood as a model which helps the marketers in assessing the balance of power in various business situations. The model is applicable to all form of business. A major advantage of this model is that it not only helps in the understanding of current position of a business but also helps in the crafting of a unique selling proposition in the future based on the assessment of current sources of power. Hence, the business is examined for both the strengths and weaknesses.

The five forces that have been selected for the model are used to identify two things on any given industry - the level of competition and the level of attractiveness of an industry. The level of competition and the level of attractiveness in an industry can change over time. These forces are micro in nature as they relate specifically to the chosen business entity. The five forces model is illustrated as under.

Supplier power

This refers to the power that he suppliers of a company can exert upon it. This may take the form of increase in prices, payment terms, inventory turnover and others. The supplier power is the function of the number of alternatives available, the kind of supplies, and the cost of switching from one supplier to another (Porter, 1980, p. 74).

Buyer power

This relates to the ability of the buyers to bring prices down. This is a function of the kind of information that is there, the differentiation that exists in the products offered. The higher the switching cost the lower will be the buyer power.

Competitive rivalry

This refers to the level of competition in a given industry in which a company performs. If there are too many companies offering similar products, the rivalry is cut throat. However, if there are few companies and they are offering very discreet products, one may be at an advantage over the others.

Threat of Substitution

This refers to the availability of substitutes for a given product or service. In this context, it is imperative to state that a substitute product is not always the product/service of a competitor firm. It can also be the product/service of some indirect competition. For instance, the substitute of a soft drink can be a juice or it can even be ice-cream, provided it is so positioned (Porter, 2008, p. 86).

Threat of New Entry

This refers to the probability of the launch of new business in the same industry. There are certain industries which are very capital intensive such as railways and ...