Using Porter’s Five Force analysis to assess this industry, one notices that first of all the internal rivalry would be intense between us and Empire Plastics and both companies (and others) would try to severely underprice the other’s offer. There would be considerable buyer power since the target customers would be giant supermarket chains and there is little customer diversity, with a very few customers dictating who they buy from and even what price they pay. In addition there would be a lot of supplier power as well since the patent for the special plastic compound required for making these “Peglettes” was still held by Empire Plastics. So while there was little threat of substitutes for peglettes, there were very few, if none, barriers to entry.
Furthermore, there is no data given regarding what kind of sales or profits we can expect from this venture, what kind of market share we can expect in a few weeks and what is the future potential growth in this business. All this points to the fact that “Peglettes” would be an unattractive company to invest in.
The Pressed Gear Market
Again using Porter’s Five force to analyse the industry. This time there is no significant rivals mentioned in the proposal so I am assuming that none exist. Since we ourselves are the leading supplier of specialized press parts there is little pressure to be expected from the supplier side. Also there is no significant buyer advantage or power here either since the prices set on day 1 have been moving around. Also note that there are significantly high barriers to entry in this case as the top teams are very well connected and also because of the technical advantage we have leveraging on our expertise in the specialized pressed parts. There is little threat from any substitutes. This analysis clearly indicates that pressed gear industry is a viable option for investments.
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