No matter you are going to start a new business or searching for more insight into the prospects of the existing company, you definitely have a number of questions in your mind about concerned market’s competition rate. There are several ways to answer your question but the most useful one of the porter’s five forces model. It was presented by the Michael E. Porter in the year 1979. This model helps us to determine whether the business is profitable or not, keeping in mind your concerned industry’s scenario.
Implementation of porter’s five forces model on Dell Inc
The porter’s five forces analysis is a very effective tool for your business. When we talk about the global computer companies, the first name and foremost name that come to our mind is Dell Inc. It manufactures the high-quality computers, laptops, tablets, displays, and workstations. Here is the implementation of the porter’s five forces model on Dell Inc.
Threat of New Entrants: (LOW)
This force considers the current scenario for the newcomers to enter the concerned marketplace. Is it easy for them to enter or there are some potential barriers? A few common potential barriers are well known as well as reputable brands, the economy of scale, and access to inputs, absolute cost advantages etc.
As a matter of common observance, the threat of new entrants in this industry is low as compared to the other. What are the potential reasons behind? The reason is that entrance in this industry requires huge investments, skilled professional and technological infrastructure, and these entire things serve as barrier for the new entrants in the PC industry thus the threat of the new entrants for the dell inc. is low. The last but not the least thing to mention here is that Dell has a very nice image as a brand and it has won the customer’s trust so no such threats for the company.
Competitive Rivalry: (HIGH)
This force let us examine the intensity of the competition amongst the competitors in the concerned marketplace. For instance, in this scenario, you get to know about the number of competitors as well as their current standing in your concerned industry. The last but not the least thing to mention here are that you need to invest a lot if the competition in the concerned industry is high. When we talk about the competitive rivalry, it’s high in the PC industry. For the Dell Inc, the top rivals include Lenovo, HP, Asus, Apple, and Acer. All these brands are really reputable and are trying to get better with the prices as well to with the quality, in comparison to each other. In order to compete with each other, all these leaders of the PC industry are introducing new designs, latest PC with new features as well as with the increased portability.
The Bargaining Power of Buyers: (LOW TO MODERATE)
This force deals with the buyer’s power and its potential effects on pricing as well as quality. As a matter of fact, the buyers are in power in case if there are fewer customers but the more sellers. Also, the buyers have the power when the current scenario allows them to easily switch to other’s services or the products.
As a matter of fact, the buyers prefer to buy the laptops etc from the company or the brand which is well-reputed as well as reliable. In this case, when we talk about the Dell, it is one of the most reliable companies. From its existence, the company has largely focused on proffering the excellent customer’s services thus it has low to the moderate bargaining power of buyers.
Two most important aspects that affect the bargaining power of the buyers are brand quality and brand image, Dell is really strong in all these aspects.
The Bargaining Power of Suppliers: (LOW)
This force majorly focuses on business supplier’s power and their ability to raise the prices, which will in return lower the profitability of the business. For instance, you consider the number of suppliers in your concerned industry and if the number of suppliers is low, they will definitely have the additional power in this case. As a matter of fact, the bargaining power of the supplier is quilt low. What are the potential reasons behind? The reason is that as compared to the small number of companies, there is a wide array of supplier available.
Threat for Substitutions: (MODERATE)
The last but not the least force of porter’s five forces model is the substitution threat. It considers the ease of the customers in switching from business products or services. This force majorly focuses on the number of competitors, their quality, and prices as compared to the examined business.
When we analyze the last five years in this regard, we come to know that this industry is facing a steady decline from last few years. Not merely the small companies but the big and reputed companies like Dell also lost the share as well as profits in the market and rise of substitutes is definitely the reason behind. For instance, the smartphones, as well as tabs, can be utilized as the alternative to laptops for surfing the internet, game playing and listening music.
Conclusion
The porter’s five forces model is really simple yet the most powerful tool to understand the areas where the power lies in a situation of business, no matter what the concerned industry is. This model is really very useful and effective. The analysis of the model can help you to improve your standing in your concerned industry, by taking effective steps accordingly or by preventing yourself from taking the wrong steps. The porter’s five forces model is widely being used in the business world and is proved to be a really useful and effective tool in this regard.
References
Sedona, P.B., Lewis, G.P., Freeman, P. and Shanks, G., 2004. The case for viewing business models as abstractions of strategy. The Communications of the Association for Information Systems, 13(1), p.64.
Gunasekaran, A. and Ngai, E.W., 2005. Build-to-order supply chain management: a literature review and framework for development. Journal of operations management, 23(5), pp.423-451.