Porter’s Five Forces: Assessing the Balance of Power in a Business Situation

Topics: Strategic management, Management, Porter five forces analysis Pages: 1 (373 words) Published: August 26, 2013
1.6 Industry Analysis
Porter’s Five Forces: Assessing the Balance of Power in a Business Situation The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit.

Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations. Here we assess the balance of power of Bangladesh Auto Cars Limited in the business. * Threat of New Entrants: There is a huge threat of new entrance in this industry because the new business doesn’t need any specialize knowledge to start. The cost of equipments can be less if they go for lease because lease and loans are available. There are only two companies in industry which make easy for the newer ones. * Threats of Substitute: CNG conversion and CNG refueling is cost effective and good for environment and this process is quiet new so there are no substitute products. It’s a monopoly business for these companies. * Industry Rivalry: Bangladesh Auto Cars Limited and Navana CNG Limited are only listed company in this industry and Navana CNG holds almost 93.70% market share and BD Auto Cars holds only 6.30% of market share. BD Auto Cars has only two products so there is little rivalry between these two companies. * Bargaining Power of Buyers: Because of monopoly business and limited resources there is little bargaining power of buyers and the cost of substitute products is very high. There is little buyer...
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