Name: Jagdish Lohar
Porter’s Five Forces Analysis - Portable Electric Power Tool Industry (Year 1979)
1) Supplier Bargaining Power (Low)
Manufacturer are not much depend on suppliers as critical required components were fabricated in-house ( Page 7 Para 4) The Supplier’s pricing to Manufactures is solely depend upon volume ( Page 8, Para 20 ) Manufacturer’s plant are non-Union ( example B &D ), which leads to easy of in-house production. ( Page 9 , Para 7) Automation is leading to reducing dependency on traditional suppliers. ( Page 7, Para 2)
2) Buyer Bargaining Power (High)
Consumer segment buyers tend to be price sensitive & this segment was growing rapidly than the professional buyers. ( Page 3 , Para 5 ) As consumers tool becoming more sophisticated, professional buyers started buying consumer tools ( Page 2 , Para 7) Above two points lead to low on brand loyalty & price became critical factor as well as there were not much product differentiators ( Page 3, Para 1)
3) Threat of substitute products or services (High)
With improvement in battery technology, by late 1970, the cordless tool became by & large substitute for corded one ( Ref. Page 3 , Para 1 ) Consumer tool became sophisticated , which lead to alternative choice to industrial tool. This has lead higher market share for consumer tool & reduction in professional products ( Table G for B & D as well as Page 2 & Para 7) Automation became substitute for traditional machining ( Page 7 , Para 2)
4) Threat of New Entrant (Low)
Out of 70 manufacturers, top 5 were holding 67% market share ( Ref Table F , Page 8), there is stiff entry barrier for new entrant. Automation trend lead to heavy investment ( Ref P 10,Para 2 , B&D ) which was another hurdle for new entrant.
5) Rivalry among existing competitors. (High)
Slow Industry Growth & High number of competitors ( Ref Table F ,...