Reckitt Benckiser Group PLC is a British Multinational company dealing in the consumer goods industry and offering product and services related to skincare, cleaning agents, personal care, health and nutrition. Within the consumer goods industry, the company was founded in 1999 with the emergence of these two firms, Reckitt and Coleman PLC and Benckiser N.V., and the location of its headquarter is in Slough, UK. As of 2020, the company generated a substantial revenue of 14 billion pounds, and the company has an active employment figure of over 40,000 (Reckitt 2020). From a global perception of the consumer goods industry, the evaluation of Porter’s five forces is a valuable technique to sustain forward-looking policies to better comprehend the condition of the firm.
Competitive Rivalry in the Market
The competitive rivalry within the consumer goods industry is intensely high because of consumers’ demand of having everyday branded product at a low cost and their various varieties that have high consumption. As a result of these demands, several consumer goods companies have taken the market to provide necessary goods through different platforms. Therefore, it is challenging as competitors beat to aim for a reasonable price for consumers. The major competitors of the company are Procter & Gamble, Unilever and Henkel. In addition, Reckitt Benckiser is trying to lead the market with a revenue of 14 Billion U.S. dollars. At the same time, other companies in the industry have shown revenue figure of 71, 52 and 20 billion U.S. dollars (Craft, 2020). Therefore, the presence of such big firms in the industry makes the environment more competitive.
Threat of New Entrants
The risk of new entrants is regarded as low to moderate in the consumer goods industry because of the considerations of starting in a consumer goods industry, such as a significant capital for investment. There are larger concerns of other consumer goods organization such as P&G and Unilever that have overtaken as the central leading consumer goods organization with well-known brand products at a low cost. Making good ties with strong distributor’s takes more time and economies of scale is another threat for the new firms set by the existing players (Cuervo-Cazurra and Rui, 2017). However, smaller firms that provide local products that serve the same quality of purpose have entered the market, directing away a tiny portion from big firms. Therefore, in the consumer goods industry, the threat is considered low to moderate.
The Threat of Substitution
The threat of substitution in the consumer goods industry is relatively low because the products manufactured in the industry where Reckitt Benckiser Group Plc works are extremely few replacements available. However, there are few accessible substitutes that are of excellent quality but are far more expensive. By contrast, the existing firms in the industry manufacturers, with sufficient quality in the sector, are selling at reasonable or cheaper prices than replacements. This makes it less likely that buyers will switch to substitutes because of the consumers’ developed brand image and loyalty (Descotes, 2015). Hence in the consumer goods industry, the chances of threat are regarded as low.
Bargaining Power of Buyers
The Bargaining power of consumers in the consumer goods industry perspective is moderate because of the availability of multiple options of products to choose from. Furthermore, the product differentiation is less, and the variety is more, making it easier for consumers to choose. Consumers can quickly shift from firm commodities to those of other firms due to the cheap switching costs, resulting in the influence of the customer bargaining power. Furthermore, clients have access to advanced information about goods and services, making it even easier and more convenient decisions when switching from one brand to another (Villas-Boas, 2015). Therefore, in the framework of the consumer goods business, consumers have a significant effect.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the consumer goods industry is considered low because compared to the buyers, there are large numbers of suppliers in the industry in which the company participates. This means that the product and packing are offered from various suppliers, making them less influential over cost. In addition, the firms usually purchase in bulk quantity, and the switching cost of suppliers is considered low, which further reduces the negotiating power of suppliers in the industry. The consumer goods companies hold significant authority in the sector to fluctuate the deals between suppliers (Selwyn, 2013). Thus, supplier power of bargaining in context to the consumer goods industry is kept low.
References
Craft, 2020. reckitt-benckiser-competitors. [online] https://craft.co/. Available at: https://craft.co/reckitt-benckiser/competitors.
Cuervo-Cazurra, A. and Rui, H., 2017. Barriers to absorptive capacity in emerging market firms. Journal of World Business, 52(6), pp.727-742.
Descotes, R.M. and Pauwels-Delassus, V., 2015. The impact of consumer resistance to brand substitution on brand relationship. Journal of Consumer Marketing.
Reckitt, 2020. Annual Report. [online] Reckitt.com. Available at: https://www.reckitt.com/media/8728/reckitt_ar20.pdf.
Selwyn, B., 2013. The global retail revolution, fruiticulture and economic development in north-east Brazil. Review of International Political Economy, 20(1), pp.153-179.
Villas-Boas, J.M., 2015. A short survey on switching costs and dynamic competition. International Journal of Research in Marketing, 32(2), pp.219-222.