Porter\'s Five Forces and Proctor

Porter's Five Forces and Proctor & Gamble

Buyer Power: Retailers have much stronger influence when it comes to buying power than individual consumers or small business have. Able to offer the company the opportunity of selling quantities of their product depending on selling price, Procter & Gamble can negotiate with companies like Clorox. It therefore has a strong buyer power.

Supplier Power: Likely the supplier has some power due to the cost that Procter & Gamble would face in the event of switching suppliers. Nonetheless, P & G, being a Fortune 500 international company, would likely find supplier anywhere eager to do business with the company and, plausibly, too, ready to negotiate and reduce costs if need be. To that end, bargaining power for supplier is limited and consequently P&G has more power than has the supplier whose power is limited.

Threat of new entrants: Assessment here is ambivalent. On the one hand, threat is minimal since the individual would need a huge amount of capital investment to compete with this large and securely established as well as famous company. Also the capital needed for manufacturing household consumer products, such as deodorants would be intimidating. On the other hand, a small business manufacturer or individual could carve a niche for himself by creating a consumer product what would be more innovative or superior in quality to that of Procter & Gamble products. This may pose a threat for P&G. Nonetheless, the threat is minimal.

4. Threat of Substitutes: Cheaper-priced products such as those by Kroeger, by private labels, or by the same store brand itself can easily displace Procter & Gamble's products due to their cheaper cost pricing power. There is, consequently, a high threat of substitutes.

5. Degree of Rivalry: Consumers who go for P & G's products enjoy experimenting with and acquiring other brands too particularly if the price is more attractive or as attempt / interest to try something new. Buying one brand of shampoo instead of another, for instance, is quite common. Rivalry, therefore, is high.

Porter's value chain

Porter shows how firms such as Procter & Gamble can create competitive advantages for themselves. He categorizes a company's activities in the following way:

1. Primary activities: (a) Inbound logistics -- receiving the incoming material, including the handling and inventory of their material; (2) operations -- P&G's suppliers forming this material into their products; (3) Outbound logistics -- getting their products on their shelves and to the shelves of the different private stores and from thence to the customers; (5) marketing and sales -- P&G doing research on customer needs, satisfying their needs, communicating with consumers; (6) service -- fulfilling customers' needs after service has been completed, following up, and occasionally replacing products if need be. Research too is ongoing in order to discover future trends and ways to best satisfy and meet consumers' preferences.