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Porter’s Five Forces
The first force is industry rivalry. The factors that can lead to competition are the level of advertising a company uses, the competition strategy used and having a competitive advantage by being innovative (Rajasekar and Al Raee 235). In the case provided, Rubbermaid increased their prices to consumers because their suppliers had increased cost of resin. Consumers were affected by these changes, and for that reason, Wal-Mart decided not to stock their products. Sterilite on the other hand also increased their prices but by a smaller margin and therefore Wal-Mart decided to sell their products. Both companies were affected by the increase of price in raw materials, but Sterlite used the strategy of increasing their prices by a smaller margin, kicking Rubbermaid out of the market.
The second force is Bargaining power of suppliers. It happens when the suppliers of raw materials charge exceedingly high prices for important resources. The resin is an essential raw material for Rubbermaid, and when the suppliers decided to increase the prices, it had an impact on the cost the company would charge their customers. An increase in consumer prices angered Wal-Mart leading to the products of Rubbermaid being removed from the shelves as well as getting deleted from promotional material.
The third force is the threat of substitution. It happens when there are substitute products in the markets.
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The threat of substitution increases the chances of consumers switching to cheaper products when the key drivers increase their prices. In the case of Rubbermaid, they were forced to raise their cost by the suppliers but made a mistake of having a high increase margin. Their competitors had a smaller margin which then led to their products getting stocked instead of the products from Rubbermaid.
Works Cited
Rajasekar, James, and Mueid Al Raee. “An analysis of the telecommunication industry in the Sultanate of Oman using Michael Porter’s competitive strategy model.” Competitiveness Review: An International Business Journal 23.3 (2013): 234-259.
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