Strategic Business Analysis: Porters Five Forces

1704 words - 7 pages

The forces driving the competition and the intensity of the competition in an industry, are due to its principal economic structure and the behavior of the competitors (Porter, 1998). Therefore, the state of competition as shown in Figure 1 depends on five competitive factors such as industry competitors - rivalry, potential entrants, buyers, suppliers, and substitutes. As Porter(1998) states “ the collective strength of these forces determines the ultimate profit potential in the industry, where profit potential is measured in terms of long terms of long run return on invested capital.”

Therefore, this chapter will focus on the strengths of the competitive forces that drive the organization towards industry profitability by the identification of the structural features of the industry.

1.1.1 Rivalry - Industry Competitors

When analyzing the market, it is understood that the customer plays a huge role and that there is a very low switching cost for the customer due to the very low number of competitors. Even though this is an opportunity to the company at times this opportunity can be a threat to the company. The threat is prevented by gaining the information regarding the customer’s needs and assuring the customer the products that are purchased are safe and ethical. Safety of products are an absolute requirement and that as Hayleys PLC(2012) states “every one of our customers knows that buying a Hayleys product means they are choosing to buy the most optimal combination of safety and efficiency.” The main communication method used to reach the customer is through advertisements and this reaches the customer in the most efficient manner that reaches the customers concerns.

The competition in the industry causes the decreasing in profit due to the traditional economic model in Sri Lanka. Therefore to gain a competitive advantage over the rivals, the company has implemented changes in prices by introducing new features of products, increased innovation which have increased the product differentiation, and used creative approaches in launching channel distribution methods that result in growing extreme supplier relationship.

Hayleys PLC has a 136 year industrial experience and has a diversified exposure in international and local markets. As a multinational company the rivalries affect only certain levels when comparing in the industrial environment of Sri Lanka. Some of the competitors of Hayleys Consumer are Unilever, Hemas, Chemical Industries Colombo (CIC), Morison, Opex and Reckitt & Benckisser, which have a diversified range of products that are introduced for local and international recognition.

Hayleys PLC competes with the competitors in power with the main strength as quality. Hayleys PLC has achieved many quality assurance awards as the National Quality and Productivity Awards, the Asia Pacific Quality Awards, and according to Hayleys PLC(2008) “Six companies of the Hayleys Group are...

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