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Porters Model Essay

611 words - 3 pages

Bargaining power of Supplier

Bailey’s Woodworking has little or no revenue to negotiate any reductions on bulk purchases and this leaves them in a poor negotiating position. The use of teak as its premier raw material will create a disadvantageous position and while alternatives are used the teak is creating a competitive advantage as a more superior product different product. The bargaining power of suppliers is therefore low although the market is not saturated with providers the cost of switching suppliers is not high because it is price stimulated rather than quality.

Bargaining power of the Buyer

In the house hold industry the customer has many choices but Bailey had a reputation of best in class for product quality. The product however has been at a slightly higher price and could be sourced from competitors. In the commercial market the buyer has considerable leverage with the tendering process and often ...view middle of the document...

Threat of new entrants
The treat of new entrants to compete with Bailey is low because of the monopolistic composition of the industry. Each of the ten firms competing in the industry offer different services and there is difference is pricing used to capture buyers. The required capital to enter the industry may also deter possible entrants. The manufacture of furniture is a skill and small entrants into the industry can be challenging at the present time with the economic dynamics.
Rivalry among competitors

The rivalry is fierce on both the household and commercial markets and the industry is contracting. The National per capita has contributed to the down turn in the industry. Bailey’s woodworking has suffered a decline in revenue mainly due to its marketing strategies and lack of collection of revenue as well as following up on jobs already estimated.

The main competitors in the industry are BH Rose, Young sing, Alliance Woodworking and seven other manufacturers. Also competing for a market share are furniture retailers and carpenters. The competition is centred on three main aspects quality, price and promotion in the household industry and on price in the commercial industry.

Conclusion

Reversing buyer threat is of major importance. The access to the commercial buyers outside the tendering process is important to maximizing profits. The use of Bailey’s portfolio needs to be increased to the point of creating a buyer’s interest in the 'Bailey quality' this will reverse the bidding process where the buyers will bid on your product. Bailey product can be branded and used as the industry standard. The alternative is to find ways of reaching the customer directly eliminating the buyer by forward integrating.

Porter’s Five Forces Model

Threat of Substitute Products

Threat of Substitute Products

Threat of New Entrants

Threat of New Entrants

Rivalry Among Existing Firms

Rivalry Among Existing Firms

Determinants of Buyer Power

Determinants of Buyer Power

Determinants of Supplier Power

Determinants of Supplier Power

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