In every industry, there is a model that can be used to identify the strategy, profitability, and power of particular companies. This model is called the five forces model. This gives an analysis of companies for competing and personal uses. The five forces model consists of two major parts. The first part of the model consists of rivalry among existing firms, threat of new entrants, and threat of substitute products. This part measures how much actual and potential competition there is. The second major part is between the bargaining power of buyers and the bargaining power of suppliers. These two measure the power a company has or does not have over the buyers and suppliers. In using this model, we will be able to identify these valuable parts of Procter & Gamble.
Rivalry Among Existing Firms
With a high industry concentration, relatively low switching costs, large economies of scale benefits, and possible high exit costs, rivalry among existing firms in the personal products industry tends to be high.
Threat of New Entrants
There are many different barriers in the personal products industry that a new entrant would have to overcome to enter. The large companies have a huge competitive advantage over new entrants that leave new entrants with little success in gaining any market share. With established economies of scale, access to distribution, relationships, and legal barriers in the favor of existing firms in the industry, a new entrant would little success in competing. This almost eliminates the threat of a new entrant in the personal products industry.
Threat of Substitute Products
Substitute products in the personal products industry are readily available by much smaller and different firms, but due to brand name recognition and developed relationships, it is not likely that a buyer will switch products. The added benefit, due to the higher price, is usually enough to keep customers happy with the brand name 22 products. Therefore, the...
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