Porter’s 5 Forces

Porter's Five Forces is a model that identifies and analyzes five competitive factors that define
every sector and aids in determining an industry's strengths and weaknesses. Five Forces
analysis is widely used to define company strategy by identifying an industry's structure.
Competitors in the industry

Rivalry among competitors: This investigates the level of present market competition, which is
determined by the number of existing competitors and what each rival is capable of achieving.
When there are many competitors who are about similar in size and power, when the market is
developing slowly, and when customers may simply move to a competitor's product for little
cost, rivalry is intense. The concentration ratio of an industry is a strong predictor of competitive
competition. The smaller this ration, the more severe the competition. When rivalry is intense,
rivals are more likely to engage in active advertising and pricing wars, which can harm a
company's bottom line.

EXAMPLE: When we look at the airline industry in the United States, we see that it is extremely
competitive for a variety of reasons, including the entry of low-cost carriers, the industry's tight
regulation, which has resulted in high fixed costs and high barriers to exit, and the fact that the
industry is currently stagnant in terms of growth. Customers' switching costs are also relatively
cheap, and many industry participants are of comparable size (see graph below), resulting in
extra severe rivalry amongst such businesses. Considered as a whole, existing rivals in the
airline business are fiercely competitive.

Threat of new entrants: Newcomers into an industry bring with them new capabilities and the
desire to grow their market share. The degree of the danger is determined by the barriers to
entry into a given industry. The greater these entrance barriers, the lower the danger to current
companies.
The necessity for economies of scale, significant consumer loyalty for existing brands, huge
financial needs (e.g. large investments in marketing or R&D), the need for collective experience,
government laws, and limited access to distribution channels are examples of barriers to entry.

EXAMPLE: The threat of new entrants into the airline sector is low to medium. Starting an airline
requires significant upfront investments (e.g. purchasing aircrafts). Furthermore, newcomers
require permits, insurance, distribution networks, and other certifications that are difficult to
achieve when you are new to the sector (e.g. access to flight routes). Additionally, current
players are anticipated to have accumulated a vast base of experience over the years in order
to reduce costs and improve service standards.

Bargaining power of suppliers: This force examines how much influence and control a
company's supplier (also known as the market of inputs) has over the potential to raise prices or
decrease the quality of acquired products or services, lowering an industry's profitability
potential. Supplier concentration and the availability of replacement providers are critical
elements in determining supplier power. They have more authority since there are fewer of
them. Since there are several suppliers, businesses are in a better position.
The switching costs of enterprises in the industry, the existence of potential replacements, the
strength of their distribution networks, and the uniqueness or level of distinction in the product or
service the supplier is supplying are all sources of supplier power.

EXAMPLE: Suppliers in the aviation industry have considerable bargaining leverage. When we
look at the primary inputs that airline firms require, we can observe that they rely heavily on fuel
and aircrafts. These inputs, however, are heavily influenced by the external environment, over
which the airlines have limited control. The price of aviation gasoline is affected by variations in
the global oil market, which can fluctuate dramatically due to geopolitical and other causes.
There are just two main aircraft providers, for example: Boeing and Airbus. As a result, Boeing
and Airbus have significant negotiation leverage over the rates they charge.

Bargaining power of buyers: This force examines the amount to which consumers may put
the firm under pressure, which influences the customer's sensitivity to price fluctuations.
Customers have a lot of power when there aren't many of them and when they have a lot of
options to buy from. Furthermore, they should be able to easily transition from one organization
to another. Customers' purchasing power is minimal when they buy in tiny quantities, act
autonomously, and the seller's product is extremely distinct from any of its rivals.

EXAMPLE: Buyers in the aviation business have a lot of negotiating power. Consumers may
quickly compare the rates of several airlines by using online price comparison services .
Moreover, there are no switching costs involved in the process. Consumers nowadays are more
willing to fly with many airlines to and from their destination if it reduces prices. As a result,
brand loyalty does not appear to be very great.

Threat of substitutes: Substitute goods or services that can be used in place of a company's
products or services pose a threat. Companies that produce goods or services for which there
are no close substitutes will have more power to increase prices and lock in favorable terms.
When close substitutes are available, customers will have the option to forgo buying a
company's product, and a company's power can be weakened.

EXAMPLE: In terms of the aviation industry, the general requirement of its clients is to travel. It
may be obvious that there are several options for travel other than flying. Customers might take
the train or drive depending on the urgency and distance. Hence threat of substitutes is low to
moderate in the industry

Integrated Marketing Communication (IMC)

6 elements of marketing communication are: