Porters 5 Force Analysis

Topics: Barriers to entry, Vending machine, Vending machines Pages: 4 (960 words) Published: May 7, 2008
Porter’s 5 force model for the automatic vending industry

Porter’s 5 force model is framework for industry analysis that determines the competitive power and appeal of a market. These ‘5 forces’ show a company’s ability to serve its clients and make a profit.

The model is particularly useful for those who are looking to enter into the market as the model creates a clear picture of the industry.

Porter’s 5 key forces for the automatic vending industry are:

1.The threat of potential entrants
2.The bargaining power of suppliers
3.The bargaining power of buyers
4.The threat of substitutes
5.Competitive rivalry amongst existing firms

The threat of potential entrants – Low
The threat of potential new entrants for the vending industry is considerably low as there are many barriers to overcome.

Barriers to entry can be viewed as follows:

Access to distribution channels
The vending industry depends heavily upon a variety of products from different manufacturers. As the industry serves all kinds of public and private locations (under highly governed regulations and policies, it requires strong access to distribution channels in order to maintain a competitive edge. This in itself represents a threat for any new entrants.

Cost and price disadvantage
There is no clear cost and price advantage for any organisation in the vending industry. Vending organisations generally sell retail commodities through their machines, which are entirely control by their suppliers. There are few external factors like vulnerable inflation and food pricing and increasing employee wages.

Switching to substitute costs
Unfortunately there are several substitutes available in market and they represent a huge threat for possible new entrants. Substitutes are highly focused, selling all the possible varieties of products with clear cost advantage.

Government actions
Heavily governed regulations and policies offer another threat for the potential new...
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