Porters Five Forces

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In which industry does P&G compete? Apply Porter’s Five Forces Model to the industry. Is this an attractive industry? P&G is one of the leading companies that are operating in the household consumer product industry. P&G’s threat of substitution is extremely high as there are many companies producing household consumer products, both national and international such as Clorox, Kimberly-Clark and Colgate-Palmolive CL. Also, P&G is also competing with retailers private label brands such as Walmart’s Great Value. Because the consumer’s switching costs between products are low, the quality, price, brand loyalty and differentiation of a product is very important in influencing consumer’s purchasing decision. The barrier to entry of an average incumbent firm for this industry is relatively low. This is because the capital investment that is needed to enter this industry is relatively low. However, because of the extremely high competition and also the existence of very established companies such as a P&G, it is very hard for a new entry to be as big as current products. This is because these companies have been able to capture a large market share over the years of their existence as well as able to create brand loyalty among their customers. Therefore, for a new firm to be successful, they would have to invest a lot in research and development to be able to produce a differentiated product. The threat of substitutes for this industry is low because most of the products that P&G sells are necessity products. Consumers need these products for their daily uses. The only time when the consumers choose to substitute these products is when they choose not to use it. The power of buyers for this industry is moderate. Although, companies in this industry are able to sell their products straight to the end buyer, which are the consumers, most of their sales go through retailers such as Walmart. And because they are able to sell more products through...
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