A Five Forces Example Consumer Products

Topics: Porter five forces analysis, Brand, Strategic management Pages: 3 (717 words) Published: July 22, 2015
7/22/2015

A Five Forces Example: Consumer Products

Course 206: More on Competitive Positioning

A Five Forces Example:
Consumer Products
In this course
1

Introduction

2

Porter's Five Forces

3

A Five Forces
Example:
Consumer Products

4

Getting Back to
Moats

5

Types of Narrow
Moats

6

Wide Moats

7

Wide Moats Versus
Deep Moats

8

The Bottom Line

The five forces concept is perhaps best
explained through example. (Porter's work is
nothing short of excellent, but it is a heavy
read.) Let's briefly examine the household
consumer-products industry by considering rival
firms Clorox CLX, Kimberly-Clark KMB, ColgatePalmolive CL, and Procter & Gamble PG in terms of Porter's five forces:
Buyer Power. Consumer-products companies
face weak buyer power because customers are
fragmented and have little influence on price
or product. But if we consider the buyers of
consumer products to be retailers rather than
individuals, then these firms face very strong
buyer power. Retailers like Wal-Mart WMT and
Target TGT are able to negotiate for pricing
with companies like Clorox because they
purchase and sell so much of Clorox's products.
Verdict: Strong buyer power from retailers.
Supplier Power. More than likely, consumerproducts companies face some amount of supplier power simply because of the costs
they incur when switching suppliers. On the
other hand, suppliers that do a large amount of
business with these companies--supplying
Kimberly-Clark with raw materials for its
diapers, for instance--also are somewhat
beholden to their customers, like KimberlyClark. Nevertheless, bargaining power for both the firms and their suppliers is probably
limited. Verdict: Limited supplier power.
Threat of New Entrants. Given the amount of
capital investment needed to enter certain
segments in household consumer products,
such as manufacturing deodorants, we suspect...
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