Perhaps you've seen a message above this page, about some emergent element; It´s the Alexandria web translator that can help you to find English definition and translate words to whatever language you want. Don't be afraid and allow this tool runs.If you have problems to understand some words, you can double click on the word and then you get the translation in Spanish, the definition in English and some links relationed. It´s possible to translate in many other language with this tool.

 

Analysing the environment

Five Forces Analysis

Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental analysis.


Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry:

 

The threat of entry.

  1. Economies of scale. E.g. the benefits associated with bulk purchasing like Google buying Youtube
  2. The high or low cost of entry. E.g. how much will it cost for the latest technology?
  3. Ease of access to distribution channels. E.g. Do our competitors have the distribution channels sewn up? It isn't easy introduce a new detergent in the grocery stands.The three largest chemical companies have two or three products in the market.
  4. Cost advantages not related to the size of the company. E.g. personal contacts or knowledge that larger companies do not own or learning curve effects.
  5. Will competitors retaliate?
  6. Government action. E.g. will new laws be introduced that will weaken our competitive position?
  7. How important is differentiation? E.g. The Champagne brand cannot be copied. This desensitises the influence of the environment.

 


The power of buyers

  1. This is high where there a few, large players in a market. E.g. 1: The large grocery chains and white brands. E.g.2: Tarradellas vs Hacendado.
  2. If there are a large number of undifferentiated, small suppliers. E.g. small farming businesses supplying the large olive oil enterprises.
  3. The cost of switching between suppliers is low. E.g. from one fleet supplier of trucks to another.


The power of suppliers

The power of suppliers tends to be a reversal of the power of buyers.
  1. Where the switching costs are high. E.g. switching from one software supplier to another. Can you easily switch from Windows to Linux?
  2. Power is high where the brand is powerful. E.g. 1: Coca Cola vs bars. E.g. 2: Pepsi Cola vs Carrefour.
  3. There is a possibility of the supplier integrating forward. E.g. Brewers buying bars.
  4. Customers are fragmented (not in clusters) so that they have little bargaining power. E.g. Gas/Petrol stations vs Repsol.

The threat of substitutes

 

  1. Where there is product-for-product substitution. E.g. 1: Tarradellas for Tele-pizza. E.g. 2: E-mail for fax. E.g. 3: From diesel trains to jets in the sixties, and now, from jets to high speed trains.
  2. Where there is substitution of need. E.g. better toothpaste reduces the need for dentists.
  3. Where there is generic substitution (competing for the currency in your pocket). E.g. Cars companies compete with travel companies.
  4. We could always do without it. E.g. cigarettes.


Competitive Rivalry

  • This is most probably to be high where entry is easy; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. This is why it is always seen in the centre of the diagram.

    Adapted to the Spanish environment from

    http://www.marketingteacher.com/Lessons/lesson_fivefoces.htm

    (Accesed november 4th 2006)

I'd included only the Alexandria translator and some examples from de Spanish environment