Porter's five force model analysis

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Porter's five force model analysis

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Porter's five force model, analysis, competitors

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Abstract

Porter's five forces model was made by Michael Porter in 1980 as a technique for industry analysis. An industry consists of a group of firms which are involved in the production of commodities which are close substitutes for one another. Essentially the five forces model provides corporations with a means of analyzing their fellow competitors within the market (Porter, 1998). It examines the strength of firms through five distinct competitive elements which collectively are key in determining the long-term profitability and competitiveness of firms within an industry.A significant characteristic of this latest financial downturn was that it was non-discerning in its impact; both large and small-scale firms within the postal and parcel industry were equally impacted. The highest negative impact was felt in the United States where mail volumes went to lows similar to those during the Great Depression. Perhaps a further point of concern to industry players would be the predictions that the industry would not recover.

Historically, volumes display a re-growth after periods of economic contractions have ended. The essential challenge with the 2008-2009 economic downturn is that a reversal in growth is unforeseeable; instead predicting (based on e-substitution rate) negative to significantly negative growth over the next decade (Accenture, 2011).

Introduction
Bargaining power of suppliers
Bargaining power of buyers
Threat of new entrants and threat of substitutes
Rivalry amongst competitors

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[...] However with its strategic mergers and acquisitions, DHL has been able to curve a strong and stable position as a logistics and solutions provider making it a common and strong player within the postal and parcel services. DPD express is yet another leader in the parcel and postal delivery particularly within The United Kingdom (www.dpd.co.uk, 2012). It is part of GeoPost, a subsidiary of France's La Poste with over 40 depots in UK and Ireland and 1700 courier vehicles. The stronghold position of GeoPost in Europe is largely attributable to the vast networks and leadership within the local or domestic markets. [...]

[...] That Universal Parcel services is the most desired firm in the postal and parcel industry. Its infrastructure layout further strengthens its bargaining power by making it not only difficult but costly as well for consumers to shift to other providers (Porter, 1998). Dalsey, Hillblom and Lynn (or as it is commonly referred to as DHL Express) has four broad divisions each run under their own divisional headquarters. The company's bargaining power arises from the centralization of internal services, which in turn support the entire DHL group's operations (www.dhl.com, 2012). [...]

[...] Discussion Bargaining power of suppliers Porter defines this force as the ability of suppliers to dictate product quality and significantly influence prices. A conglomerate of suppliers has even more power over an industry; or where the industry is characterized by few suppliers and few or no substitutes; or where the supplier's product is essential to the industry. For United Parcel Service this power arises from its dominance arising from a combination of financial muscle and sheer size of operations. Universal Parcel service is the world's largest package distribution company transporting in excess of three billion parcels and documents annually (Boulton, 1999). [...]

[...] It regards the influence with which the consumers have on the organization's profitability. This power increases where purchases are large, and the consumer size is large as well (Palmer, 2011). Other factors, which enhance the bargaining power of the buyers, include where the industry comprises small scale suppliers and the buyers are few and large; product has many close substitutes; customers have access to and are in possession of market information; low brand-switching costs for consumers. Within the post and parcel industry, this power has vividly displayed itself through the diminishing volumes of traditional mail services. [...]

[...] Rivalry amongst competitors This refers to the rivalry between competitors and is often the strongest amongst the five forces (Porter, 1998). Where it is weak, competitors can easily influence both product quality and prices so as to make higher profit margins. Where it is strong, there is a need for increased product benefit to maintain customers. Competitor rivalry can be enhanced as firms try to attain the market leadership; where market is expanding slowly or is shrinking; high perishability of products or high degree of homogeneity of products. [...]

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