Porters 5 Forces Analysis

Topics: Industry, Manufacturing, Material Pages: 3 (861 words) Published: May 24, 2011
Rivalry Among Firms: High
The global industry of construction and agricultural machinery is characterized by intense rivalry among firms due to its competitive strategies. (Book) When few multinational companies dominate the market, a consolidated industry exists, making it crucial for companies to lead in market share and profit margins. (Book) This in turn creates low switching costs for buyers allowing them to purchase from different companies without hesitation. (ML)

Fixed costs for production factories, use of large amounts of materials, and high establishment costs make the barriers to exit in this industry high. (2 ML) With the recent economic recession the price of metals has dramatically increased, which in turn increases material costs and pressurizes price margins for companies in order to stabilize prices for buyers. (MLUS) In order for the leading companies in this global industry to avoid economic downturns, there is pressure to distinguish machinery by product differentiation and create brand loyalty. (ML)

The Relative Power of Other Stakeholders: High
Environmental groups and government agencies are the main stakeholders that have an effect on the heavy machinery and equipment industry. The Environmental Protection Agency sets emission standards for heavy trucks and machinery; companies have to reduce emissions by a certain percent each year. (NA) These strict requirements make buying machinery more expensive because machinery and engine parts need to be redesigned frequently to keep up with the current regulations. (NA) Also, the Energy and Security Act of 2007 requires ethanol and other clean fuels to be blended into diesel gas by 2022. (NA) Fortunately, ethanol production has increased, making it less expensive for major manufacturing companies. (NA) Transport, uses of machinery, and disposal of substances are also regulations that need to be taken into consideration. (ML)

The Bargaining Power of Buyers: Medium
The primary buyers in...
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