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Five forces of consumer goods package goods industry

Bargaining Power Of Suppliers | Porter’s Five Forces Model

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.

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. Strong buyer power from retailers. More than likely, consumer-products 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 Kimberly-Clark.

Unilever’s Five Forces Analysis (Porter’s Model) & Recommendations

Nevertheless, bargaining power for both the firms and their suppliers is probably limited. Threat of New Entrants. The test is whether the small manufacturer can get its products on the shelves of the same retailers as its much larger rivals. Low threat of new entrants. Within the consumer-products industry, brands succeed in helping to build a competitive advantage, but even the pricing power of brands can be eroded with substitutes such as store-branded private-label offerings.

  • The biggest threat to the diamond industry are from high quality high tech synthetic diamonds;
  • Examining an industry through the framework of Porter's five forces helps illustrate the different dynamics at work;
  • Other firms in the industry are similarly affected.

In fact, some of these same store-brand private-label products are manufactured by the large consumer-products firms. The firms believe that if they can manufacture and package a lower-price alternative themselves, they would rather accept the marginal revenue from their lower-priced items than risk completely losing the sale to a private-label competitor.

High threat of substitutes. Consumers in this category enjoy a multitude of choices for everything from cleaning products to bath washes.

Competitive Rivalry or Competition with Unilever (Strong Force)

While many consumers prefer certain brands, switching costs in this industry are quite low. It does not cost anything for a consumer to buy one brand of shampoo instead of another.

This, along with a variety of other factors, including the forces we've already examined, makes the industry quite competitive. High degree of rivalry. Examining an industry through the framework of Porter's five forces helps illustrate the different dynamics at work. It's not always clear-cut, either, so one wouldn't expect all of the firms in this industry to fall into one big bucket labeled wide moat or narrow moat.

  • High degree of rivalry;
  • Contingency plans should be put together to avoid disruption to the value chain;
  • Historically, consumers had no control over the diamond industry, its pricing and supply;
  • It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process;
  • Threat of New Entrants.