Porter's Five Forces

Topics: Barriers to entry, Brand, Substitute good Pages: 3 (677 words) Published: October 28, 2008
Porter’s Five Forces which categories into 5 segments, is a modern competitive strategy to look at the larger value system of activities and actors in order to evaluate the potential of an industry and understand the effective competitive strategies. Suppliers and Buyers, and not only direct competitors, affect both how much value is created and who gets the share of the value created by the value system.

Potential Entrants

Unilever faces low threat of new entries since the market has been more or less gained Economies of Scale with a few of the big companies like P&G, Kraft and Nestle. Wtih such barriers to entry, it makes new comers coming into the industry very difficult in terms of survival. High product differentiation enables Unilever to command a price premium while deterring new entrants since their customers recognized their brand names whereas start-up entrants are relatively unknown. Such industry is also capital intensive, requiring big amount of capital to operate. Being capital intensive and existing high switching costs acts as the barriers to exit.

Bargaining Power of Buyer

With intensive rivalry for market share within the big companies within the industry, buyers had gained significant power in deciding which products of which company to choose from. Switching costs are low for buyers since they can easily find substitutes easily, for example a consumer can switch from using Persil Capsules to Ariel Liqui-Tabs (both are liquid detergent in the form of capsules, having Persil manufactured by Unilever and the later by P&G.. Buyers incurred low costs in switching suppliers since they hold more power over them.

Bargaining Power of Suppliers

Unilever has a low supplier power since it has been believed that a brand manufactured by whichever company does not make a difference and it should not make a difference, because the retailer has to take a decision with regards what is best for their shopper and having brands on the...
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