What is porter’s five forces model all about? It is a sort of analysis tool that helps you to determine the competition level in the concerned industry, based on the five forces. Also, it tells you about the level of profitability; no matter you already own a business or going to setup a new one.
The model was presented by the M. Porter in the year 1979 and was proved to be really very effective for almost all sorts of industries. The five forces that are included in the porter model are following:
1. Threat of new entrants
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threat of substitute products or services
5. Industry rivalry or competition
With the help of these forces, you can determine the structure of the industry, based on the current scenario, as well as the level of competition in any concerned industry.
Implementation of Porter’s Five Forces Model on GE
GE, General Electric Co. is a well-reputed as well as the well-known company that proffers the electric services and products, in a wide range. It is considered one of the largest service providers throughout the world. The business activities of GE can be commonly divided into 11 main segments:
1. Advanced Materials
2. Consumer Finance
3. Commercial Finance
4. Consumer and Industrial
5. Energy
6. Equipment and Other Services
7. Insurance
8. Healthcare
9. Infrastructure
10. NBC Universal
11. And Transportation.
A Quick View of Porter’s five Forces Analysis on GE
Force # 1 of porter’s analysis on GE- Threat of new entrants – LOW
Force # 2 of porter’s analysis on GE- Bargaining power of suppliers –LO
Force # 3 of porter’s analysis on GE -Bargaining power of buyers –MEDI
Force # 4 of porter’s analysis on GE – Threat of substitute products or services – MODERATE TO HIGH
Force # 5 of porter’s analysis on GE -Industry rivalry or competition – MEDIUM
Competitive Rivalry
As mentioned above, GE is a well-reputed as well as the world’s most branched out companies, as its 11 main sectors are already mentioned. When we talk about the broad view, the largest competitor of GE is Siemens, on the conglomerate level. One more competitor that gives a tough competition to GE is Koninklijke Phillips Electronics. Though the competitor mentioned later i.e. Phillips electronics is GE’s smaller competitor but it’s giving tough time to GE for the reason that with the passage of time, it’s continuously expanding. The main advantage of this world’s largest company, GE, is that it’s so diversified. There is not a list of many companies which are considered its competitors but yes there are a few ones that give it a tough competition.
The Threat of New Entrants
When we talk about the threat of new entrants for EG, we come to know that it’s small for it. The reasonsare obvious. The first and foremost reason is that the reputation of the GE, as well as its size, makes it difficult for any newcomer to enter the industry and compete it. Also, another thing is that entering this marketplace requires lots of investment and the startup cost. The last but not the least barrier for the new entrant may be the legal issues. So, all these factors combine to serve as a barrier to enter to this marketplace and compete at such a level.
The existing customers of the GE have a very strong relationship with the company so it is very difficult for a new entrant to make a try in this scenario.
Threat of Substitute Products
Not merely to GE, but if we look at the general perspective, every company or the service providers have this threat. The reason is that the customers are always having the multiple options to buy the products from. In thecase of GE, the customers have other options available too, for instance, the Phillips, LG etc, which are considered the GE’s competitors. So, GE needs to constantly look at its prices as well as the product’s features for the reason that the threat of substitute products always remains high so it needs to proffer the utmost satisfaction to the customers.
As a matter of fact, we commented the threat of substitute products for GE as moderate to high? Why it’s been called moderate? The reason is that the customers of GE are really loyal to the company for the reason that they trust the brand to their full. So, if we look through this perspective, the threat of the substitute products becomes moderate.
Bargaining Power of Buyers
The bargaining power of buyer for GE is medium. As a matter of fact, the GE is known for manufacturing the high-quality products. Not merely the high quality but GE is also known for c charging the fair prices. So, according to the customers, GE keeps its customer satisfaction at its priority. So, in this scenario, GE remains high in the competitive wars, no matter the wars of prices or the wars of product’s quality.
Bargaining Power of Suppliers
For GE, the bargaining power of suppliers is somewhat low. What is the potential reason behind? The reason is that when a company buys a huge volume of products from the suppliers, in this sort of case, the suppliers hold the minimal ability to bargain with the company. Same is the case with GE and its suppliers. The suppliers of GE hold no power to bargain for the reason that GE buys a massive amount of goods from its suppliers and they can’t afford to lose that. Most of the suppliers of GE won’t be able to even survive if they lose the connection with GE. On the other hand, the power remains in the hand of GE for the reason that the company is really flexible in choosing its suppliers.
References
Porter, M.E., 2008. Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.
Porter, M.E. and Advantage, C., 1985. Creating and sustaining superior performance. Competitive advantage, p.167.