PORTERS FIVE FORCES ANALYSIS Porter\'s Five Force\'s Analysis is a technique for
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PORTERS FIVE FORCES ANALYSIS
Porter's Five Force's Analysis is a technique for analyzing the competitors and to determine various strategies to beat the competition. It was developed by Michael Porter. The five major forces of competition are
Rivalry among competitors
Threat of new entrants
Bargaining power among suppliers
Buying power among customers
Threat of substitute products
After a thorough analysis of different industries, I finally decided to invest on health and fitness industry making equipment. This is because the industry seemed to be attractive to invest with regard to challenges from the competitors and devising strategies to beat the substitutes and competitors. Health industry is a fast growing industry and as such there is high competition in every industry. After a thorough study of various industries, I have finally decided on manufacturing products for the health and fitness industry.
The company is called Fit n Fine Inc., which is a health and fitness equipment manufacturing industry. The company will produce activity trackers, fitness equipment.
FIVE FORCES MODEL OF COMPETITION FOR FIT n’ FINE INC.
Five Forces Model is considered to be a vital framework for developing the strategy of an organization. It was developed by Michael Porter. These are the five forces that determine the structure of the competition, for Fit n Fine Inc.
Threat of new potential entrants
Initially the threat of new entrants will be quite low for Fit n Fine Inc. This is due to the high switching cost associated with health and fitness equipment manufacturing industry, consumer electronic industry. When the switching cost between companies are higher, it will be difficult for the companies to switch between brands. By switching to a particular brand for a long period of time, develops a sense of loyalty in the mind of customers. When the brand loyalty combined with a high switching cost, makes a new potential entrant very difficult to enter into the market.
However, the activity tracking industry is gradually picking up with already existing competitors like Xiaomi, which is new in the industry. They had shipped around 12 million activity trackers across the globe. This company is certainly a threat to Fit n Fine as they have already captured a market share of 15.5 percent globally.
Further, the company could also adopt a strategy of lowering the prices, in order to attract price-sensitive customers without losing much of the company’s market share. As it is assumed that there will no other new entrants for new threat for Fit n Fine Inc., the company aim to focus on producing quality products at reasonable prices.
Threat of substitute products or suppliers
Threat from substitute products will be quite high for the company. The similar feature of activity tracking feature can be found in a variety of other devices by other companies. Ipods are used as fitness trackers by many fitness enthusiasts. Garmin and Under Armour will be posing great competition to the company even though they operate in different industries. Companies like Apply are producing smart watches which may outperform the tasks of Fit n Fine’s products.
But the companies is determined to devise many strategies to beat the competition from the substitute products. Fit n Fine Inc. will devise a differential kind of strategy to challenge the threat of the substitute products. Otherwise, these substitutes may limit the growth of the company by setting a sealing price on the products. Definitely the company will have to face serious competition from quite a few substitute products. In order to face this challenge, the company is planning to follow a cost leadership strategy by setting low prices to attract customers. This will help the company to yield customers with less marginal profit. Gradually Fit n Fine hopes to increase its profit by adding product features, investing in research and can gradually increase the price after two to three years.
Bargaining power of suppliers
Since bargaining power of suppliers is low for fitness tracking and consumer electronic industry, Fit n Fine will utilize this low bargaining power of suppliers by purchasing electronic parts for the products from different suppliers. This makes the suppliers less powerful in the activity tracking industry so that suppliers won’t be able to increase the price of their items. This gives an advantage for Fit n Fine to choose from a variety of suppliers. Moreover, suppliers will be able to provide quality products with affordable cost.
Bargaining power of buyers
Fit n Fine will have high bargaining power of buyers. Since there at least four to five known competitors and there is a large pool of buyers with high bargaining power. The existence of substitutes and competitors will enable buyers to bargain Fit n Fine products. In order to prevent such situations, Fit n Fine will have to be unique in the operations and product features. The company will form a team of high caliber researchers for experimentations and innovations in the product line.
Rivalry among competitors
The major existing competitors of Fit n Fine will be Apple, Samsung and Garmin. Fit n Fine has identified Xiaomi as a very strong competitor. The company is very alert about competitors and will take every step to protect the market share. As people are becoming more health conscious and fitness freaks, it can be undoubtedly said that Fit n Fine will have to devise innovative marketing strategies incorporating the marketing mix. Product features will be added from time to time or innovative products with affordable prices will be developed to keep the rivals and competitors at bay. The company will be experimenting on the products with innovative features. This will be the winning strategy of the company, thanks to the company’s foresight regarding competition and rivalries.
Considering the strategy with regard to differentiating products through research and innovation, the company is determined to face the challenges and establish in the health and fitness industry.
Explanation / Answer
Many discussion opportunities come up where you need to respond to other people's opinions and comments. Then respond to your Discussion topic after you have completed your Reading. Discussion Topic: Porter’s Five Force Analysis Choose an industry in which you would like to compete globally. Use the Five-Force method of analysis to explain why you find that industry attractive for business.
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