The Porter five forces model can be used to analyze the company’s situation and its ability to survive in the industry.
Consumer Power
Consumer power is high. This implies that consumers in the market have the ability to influence the price of goods and services offered in the industry. The number of firms in the industry gives consumer more bargaining power. Availability of many options also gives consumer more power, as they can easily switch from one brand to another whenever they are dissatisfied with their current supplier (Lynn, 2012). It is imperative for businesses such as Company G to comply with customer demands failure to which they risk losing them to the competition.
Competitive Rivalry
Competitive rivalry is considerably high in the industry (Thurston, Morris, & Steiman, 2013). Company G faces stiff competition from companies that have been operational in the market for many decades. Equally, its peers are also a challenge to the company G. The company attempts to produce high quality products and services to remain ahead of its competitors. Nevertheless, the competitors are always looking for new ways to improve their edge in the industry. This explains why Company G must revise its strategies from time to time to maintain its competitiveness. Continuous improvement in product quality and design is of the essence.
Bargaining Power of Suppliers
Supplier power is moderate. Company G has established healthy relationships with its current suppliers. This has helped it in negotiating fair deals for materials required to produce its products and services. However, different material requirements place the company at a disadvantage in terms of attracting the right suppliers. It is forced to work with many suppliers, which reduce in power in determining the price of materials. Nevertheless, the company can leverage on the relationships created with current suppliers to improve its ability to handle new suppliers.
Threat on New Entrants
The threat on new entrants is low. The capital required to establish a firm highly regarded as Company G is considerably high. In the same way, a new entrant may be required to spend a lot in marketing to create awareness on its products. Companies currently operating in the market enjoy high levels of customer loyalty. As such, it may be hard for a new entrant to attract consumers to realize high sales and profits (Lynn, 2012). Companies such as G also take advantage of their economies of scale to keep the costs down, hence their ability to offer products that are priced competitively. Typically, new entrants lack such advantages and hence encounter challenges entering the industry.
Threat of Substitutes
The threat of substitutes is high (Thurston, Morris, & Steiman, 2013). There are companies in the industry and other industries that offer products and services that act as substitutes to those provided by Company G. Individual consumers have the freedom to choose between what is provided by the firm and the substitutes. For instance, they can decide to visit an espresso shop to purchase readymade coffee or tea drink. It is essential for the firm to always give its consumers a reason to consume it product as opposed to substitutes.
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