Porters Five Competive Forces Essay Sample
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- Category: economics
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Porters Five Competive Forces Essay Sample
Porters five competive forces is a system that was devised to describe a companies stragetic posistion within a specific market. It is comprised of 5 fores, threat of new entrants, bargaiig power of suppliers, threat of new entrants, bargainig power of suppliers and the competion within the market. The first force, the threat of new entrants is the risk that the company faces when factoring in the posibility of new companies comming in t their market. It is comprised of multiple factors, for example if a company was a leader in their market of the stpe industrythey would need to watch for the possibility of another compay statting up because the the threat is baised o the time and cost of a new companies enty into the markter. Knowlede of the industry is alow a factor and would be a higher factor if the incomming company had previous knowledge of the indutry than someone who proviosle did not work in the field. Another factor is the cost adantages of entering the market, weather the company would make a profit or if the cost of start up is too high. Technology and physical barriers is also a factor, like ddistance is a threat original company has to factor in when concidering the risks.
The second force is the barganing power of the suppliers, which is the pull the suppliers have with a company that is buying their raw goods. . This force is a factor of a set of varriables within themselves, including the size of the suppliers and the ability of the company to witch to a subsitute. The unquenes of the raw good recieved from the suppliers is also a major threat. Using our previous example, a company who manufactors staplers is using a compnay that supplies a generic prouct for the stapler body but a unique prodct for the casing that goes over the prouct. the cost for the manufcturing company to switch is higher than staying with the company and paying more for the raw goods. Therefore the supplier has greater bargaining power oer the manufactor. The threadt of comptetion is the threat of subisies or subistuest This is when another company comes in a nd makes a simmilar product that the customers could switch to using. Customers will only swich when the product is perciedved as simmilar in performance and the cost of switching does not out wiegh the cost of not switching. Another factor is buyer willingnes to swich to another company.
Some people, expecially older people are not willing to swtich, while some will swich if the other product is less expenisve and performs just as well. The bargaining power of customers is a laarge factor. It is made up of the buying amouth that they reguallarly purcahsed and the diferciation that they percieve is within the corganization . the elasticity of the product is a big factor and the icntives that they have for swiching and not switching is also a major factor. Customers brand idenity is also a major factor when conidering swtihing to another company. the identiy they feel they have when purchasing or buying the prouct and the identity they have when using the pruct is what determines the buying power of the customer. the final factor is the copetion within the market. the other organizations that are already in the market and are already a major player in the industry are already going to have a facotor of themselves. However the number of suppliers and the size of them is factored into the ratio. the exit factors and the differintion, niche, and quality of the product is part of the ratio.
The company i chose was Starbucks Corp, mainly because my husband was brewing coffee at the time and Folgers was not listed on the S&P website. Starbucks has had a rough few years with the economy taking a downturn and has seen some well know, less expensive competitors come into the mix. their two main competiors are Duckin’ Doughnuts and McDonalds. Both companies offer a low cost alternaitive to an expensive treat while offering something for the moms who have children with them when they are buying their coffee drinks. Starbucks is ranked thrid in the industry behind Nestle corporation and McDonads, but behin Duckin’ Dougnts. They have seen more growth than both other corportations over the past quarter and have a higher profit margin than all of their competiors except Duckin’ Doughnuts. however their stock prices have not changed sense last quarter as more and more people are bing more conservitive with the funding they have available. They are listed in the industury of resturants and are concidered a specilaty store in the market. The resturant industry is set up by a both small and large corporations and stores and they are privatly and publicly held. This is a large market.