Enhancing The Walt Disney Company’s generic competitive strategy and intensive growth strategies can effectively address such concerns in this component of the external analysis. The small population empowers suppliers to impose a strong force on Amazon.com Inc.’s e-commerce business. For example, changes in prices of equipment from a small number of large suppliers could directly impact the company’s online retail operational costs. However, the moderate forward integration limits suppliers’ actual effect on Amazon. Moderate forward integration equates to a moderate degree of control that suppliers have in the sale of their products to firms like Amazon.
Moreover, the moderate size of most equipment manufacturers limits their influence on the company. Based on this aspect of the Five Forces Analysis of Amazon, the external factors emphasize the moderate significance of suppliers as a strategic determinant in the online retail industry environment. Amazon must address the major forces of competition, consumers and substitutes, based on the Porter’s Five Forces Analysis of the business. It is recommended that the company must address the strong force of competitive rivalry by emphasizing competitive advantage and strengths of the e-commerce organization. For example, the company must continue boosting its brand image, which is among the strongest in the industry.
Also in this external analysis, the moderate ability to substitute has a correspondingly moderate contribution to the intensity of customers’ power in the business environment. Therefore, this component of the Five Forces analysis underlines business strategies for retaining Disney’s customers amid competition in the global market. The other forces (the bargaining power of suppliers and the threat of new entrants) are also significant to the business, although to a lower extent. In this regard, a recommendation is to strengthen the business by building on the strengths enumerated in the SWOT analysis of McDonald’s Corporation.
Starbucks Corporation (Starbucks Coffee Company) successfully grows through management effectiveness in addressing the impacts of the five forces in the global coffee industry and coffeehouse industry environments. The company deals with external factors, such as the ones outlined in this Five Forces analysis of the business. Michael E. Porter’s Five Forces analysis model evaluates the industry environment through relevant external factors that define the competitive landscape.
Bargaining Power of Apple’s Customers/Buyers (Strong Force)
This recommendation addresses the leadership objectives contained in Disney’s corporate vision and mission statements. The company has one of the world’s strongest brands, ensuring business competitiveness in the global entertainment, mass media and theme parks industries. However, aggressive competitors can reduce this relative brand value in the industry environment. Thus, strengthening the brand helps overcome the external factors linked to high-intensity competitive rivalry.
Summary & Recommendations: Porter’s Five Forces Analysis of Tesla, Inc.
McDonald’s Corporation expands internationally through strategies that account for the external factors in the industry environment, as identifiable through a Five Forces analysis of the business. Michael E. Porter’s Five Forces Analysis model provides valuable information to support strategic management, especially in addressing relevant issues in the external environment of the business. In this Five Forces analysis of McDonald’s, the forces are mainly within the fast food restaurant industry. As the leading restaurant chain business in the world, the company is an example of effective strategic management, especially in dealing with competition in different markets worldwide. This status shows that McDonald’s strategic direction is appropriate to the external factors, such as the ones identified in this Five Forces analysis.
The company’s managers must focus on reducing the effects of competitors and substitutes on revenues and market share. Also, it is recommended that McDonald’s make its product innovation process more aggressive.
This prioritization is reflected in Tesla Inc.’s generic strategy and intensive strategies. Low switching costs make it easy for customers to switch or transfer from one provider to another. For example, customers can easily switch from Disney’s movies to movies from competing firms. In Michael Porter’s Five Forces Analysis framework, this external factor strengthens the bargaining power of customers in the company’s industry environment. On the other hand, customers’ moderate price sensitivity imposes a moderate force on the strategic success of The Walt Disney Company.
Consumers have access to high quality information regarding the services of online retailers and the products they sell. This external factor affects Amazon.com Inc. in terms of the ability of customers to find alternatives to the company’s online retail service. In relation, the low switching costs make it easy for consumers to transfer from Amazon to other firms, such as Walmart. Also, the high availability of substitutes further empowers consumers to shift from one retailer to another. For example, instead of purchasing on Amazon’s e-commerce website, a customer can easily go to one of Walmart’s stores, which are strategically located throughout the United States.
Based on the low switching costs, customers can easily shift from Starbucks to other brands. In addition, the high substitute availability means that customers can stay away from Starbucks if they want to, because there are many substitutes like instant beverages from vending machines. These strong factors overshadow the fact that individual purchases are small compared to the company’s total revenues. The small size of individual purchases equate to the weak influence of individual buyers on the business.
- In relation, the low switching costs make it easy for consumers to transfer from Amazon to other firms, such as Walmart.
- Consumers have access to high quality information regarding the services of online retailers and the products they sell.
Moreover, in terms of product differentiation, available products in the market are generally similar in fulfilling specific purposes. For example, many popular apps are available for Android and iOS devices, and cloud storage services from different companies are available to iOS users. In Porter’s Five Forces analysis model, this condition creates a strong force by making it easy for customers to switch to other sellers or providers. On the other hand, the low switching cost means that it is easy for customers to switch from Apple to other brands, based on price, function, accessibility, network externalities, and related concerns. The combination of these external factors in this part of the Five Forces analysis leads to tough competitive rivalry that is among the most significant considerations in Apple’s strategic management.
Low switching costs reduce barriers for Tesla customers to purchase cars from other providers. In the context of this Porter’s Five Forces analysis, this external factor imposes a strong force against the company and other players in the automotive industry environment. However, the availability of substitutes is only moderate in many cases, thereby limiting customers’ bargaining power against Tesla Inc.
For example, many customers in suburban areas have limited access to public transportation, making it more practical to drive their own car. In addition, the low volume of purchases (each customer buys and keeps only one or a few cars) reduces the influence of customers on Tesla. Thus, the intensities of the external factors in this aspect of the Five Forces analysis reflect the bargaining power of customers as a moderate force and a secondary management priority.
This Porter’s Five Forces analysis of Disney also warrants strategies for customer retention to address the strong bargaining power of customers. For example, high quality attractions coupled with the company’s brand can optimize customer retention in the amusement park industry.
While the food service industry is saturated with aggressive firms, new products can attract new customers and retain more customers. In relation, based on this Porter’s Five Forces analysis, McDonald’s can implement higher quality standards to address the forces of competition and substitution. In this component of the Five Forces analysis model of the business, the bargaining power of buyers is among the most significant forces affecting the company.
Starbucks Corporation’s marketing mix or 4Ps provide support for brand strengthening to partially address the bargaining power of consumers. In this external analysis case, the low switching costs enable substitutes, such as public transportation, to easily attract customers. This external factor imposes a strong force against Tesla’s industry environment.
Threat of New Entrants or New Entry (Moderate Force)
However, the moderate availability of substitutes limits such influence of suppliers. For example, customers have only a moderate and limited number of substitute options in the market. In relation, many substitutes have only a moderate level of performance in satisfying customers’ practical needs. Such aggressiveness, observable in rapid innovation, aggressive advertising, and imitation, impose a strong force in the industry environment.
Five Forces Analysis of Apple Inc. – Overview
How can we reduce threat of substitutes?
The threat of substitutes is the availability of other products that a customer could purchase from outside an industry. The competitive structure of an industry is threatened when there are substitute products available that offer a reasonably close benefits match at a competitive price.
Despite such weakness, the other two external factors strengthen the bargaining power of customers. Thus, this component of the Five Forces analysis shows that the bargaining power of customers is a top-priority strategic issue.