Please take Procter & Gamble (P&G) company and determine the intensity of its competitiveness by using the Porter’s Five Forces model.
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In today's dynamic and competitive business environment, survival, growth and profitability are the essence goals of all industries. Nowadays, Porter's Five Forces model is currently being adopted as the powerful management tool of choice by many organizations. The essence of this model is that it can help senior managers to make right decision and build and sustain competitive advantages in the organization level. This document presents the overview approach of Porterˇ¦s five forces framework across organizations. And critically evaluation of porterˇ¦s five forces model mainly focused on identifying the benefits and limitations of it and exploring some perceived issues or problems regarding implementation.
2.0 MICHAEL PORTERˇ¦S FIVE FORCES
2.1 Porterˇ¦s Five Forces Model
The economic structure of an industry is not an accident. Its complexities are the result of long-term social trends and economic forces. But its effects on business managers are immediate because it determines the competitive rules and strategies managers are likely to use. Michael Porter has identified five forces that are widely used to assess the structure and competition of any industry
Together, the strength of the five forces determines the profit potential in an industry by influencing the prices, costs, and required investments of businessesˇXthe elements of return on investment. Stronger forces are associated with a more challenging business environment
Porter’s Five Forces Model of Competition
1) Potential Entrants
Following France's VICHY, LRP, AVENE, URIAGE, Japan, FERZEA, KANEBO, and other renowned international pharmacy sales professionals Make-up brand to China one after another battle drug cosmetics goods market, domestic pharmaceutical enterprises to get involved in the field of cosmetics, "heat" is also on the rise. Wang Laoji medicine in the first half of last year launched a topical treatment of acne products - "Qudou gel," "Pathfinder" medicine cosmetics goods market, good response, the firm into its cosmetics market confidence; King Xiu Tong Pharmaceutical formally announced in September last year into the field of traditional Chinese medicine cosmetics industry, in more than 500 million for medicines and cosmetics of the GMP certification of equipment, introduced the cover of the Mask, cream paste, essential oils, cosmetics kits, and other types of more than 70; At the same time, also founded the first "medicine cosmetics shop" flagship store, and absorb a large number joining, the rapid expansion. All these markets are indications that China's pharmaceutical enterprises, especially enterprises enter the Chinese medicine or to get involved in the field of cosmetics have built trend. The first is the functional needs of consumers, in accordance with the relevant laws and regulations on cosmetics, traditional cosmetics is modified or used to protect the skin appearance, the skin can not change the structure or function, we can not meet consumer demand for functional maintenance, but the use of drugs, Also requires a doctor's prescription and instructions, while the potential side effects and risks, not suitable for general public use. Amy consumers they want a psychological force not only as cosmetic drugs as safe and as effective as the "intermediate" there. But the traditional Chinese medicine is also our country tradition “the national essence”, in the minds of consumers represent the "natural, plant, no side effects" concept. Thus, between cosmetics and medicines between the Chinese cosmetics there will be a broad demand for its prospects. Followed by pharmaceutical companies are now operating difficulties process in recent years, China's pharmaceutical industry because of changes in pharmaceutical distribution, GMP identified replacement, raw materials prices, the policy of price cuts, bidding and purchasing, and other factors, industry profits continue to decline . Chinese medicine production enterprises in particular, the loss of as much as 30 percent. And the related report showed: Although China's beauty trade has maintained a 15 per cent of the rapid growth in output value over 180 billion RMB, but comparison with the developed countries, China's per capita consumption of beauty is also a very low level, there are an even more enormous room for growth . It is estimated that by 2010, China's beauty trade value will be over 300 billion RMB. This one is an anti-contrast, making many medicine company to seek new economic growth points of the eyes lock in "medicine cosmetics products" market.Re-cosmetics products industry "low threshold, high profits", compared with the pharmaceutical industry, beauty products than the profits of drugs a lot of high and relatively low threshold of access. This is a professional technical equipment and strong financial strength of the medicine company, and it is very tempting.
As the giant of the Daily Chemical Industry, P&G Company has absolutely advantage in it, because P&G Company itself is a big manufacturer.
In the domestic cosmetics market, P&G, L'OREAL, SHISEIDO, and other foreign brands in the occupied part of the high-end, as a national brand of poetry, and other mining enterprises Although accomplish something, but in market share is difficult to match; in the low-end mass market On the many brands, the balance of power brands, fierce competition. Foreign brands will not only on price but also in the media on the domestic big brands blocked. And its ultimate purpose is to seize the 23 markets, China's capture in low-priced market. At present, the international cosmetics brand sales of cosmetics in China has accounted for about 60 percent of sales, more sales accounted for about 90%. China today cosmetics market to Europe and the United States brands as fashion, in fact, the Asian, European and American cosmetics There was a clear difference between Eastern and Western culture because there is a mentality and ideology of different people in Europe and the United States and physical, temperament, color, soil and water, and other congenital factors and falls far short of Asians, making Europe and the United States can not fully display brand of quality and characteristics of Asians. "People should use their own skin for the skin cosmetics." So P&G Company should accelerate the pace of localization in China to keep the competitive advantage.
P&G Company’s products are the major brands: Head-Shoulders, Rejoice, PANTENE, VS, CLAIROL, SK-II, Covergirl, Olay, Pampers, Whisper, Crest, Safeguard, Zest, ARIEL, Tide, Pringles, Gillette, DURACELL, BRAUN etc. Substitutes for major brands are SLEK, Hazeline, SDEW, Puyen, EXTRACT, LaFang, ARCHE, TOBABY, Amyway, AVON, MARY KAY, MININURSE, MAYBELLINE, Caisy, MAXAM, SOFTTO, Johnson, Nice, Colgate, Zhong Hua, Liby, Keon, OMO, Lay’s, NANFU and so on.
5) Industry Competitors
On the brand, P&G Company’s principle is: If a certain type of space is also available in the market, the best of those "other brands" is also P&G Company’s products. So P&G Company’s multi-brand strategy in all industries, it has a high market share. For example, in the U.S. market, P&G has eight kinds of detergent brands, six kinds of soap brands, four kinds of shampoo brands and three kinds of toothpaste brands, each brand's aspirations are not the same. So P&G implementation of the multi-brand strategy, and will not cause vicious competition within the pattern.
1.4The Competitor Environment
LONGLIQI Biological Technology Limited liability Company, now LONGLIQI is the most biggest scale in China, the most advanced technology snakes health products, on product research, development and production and sales base. From the “5S”: “site management”, “zero defect”, “quality management”, “human-based management” to “exposes shortcomings the type transparent management”, and benefit from such advanced thinking and decision-making awareness of the LONGLIQI Since 1996, sales Has been an annual rate of more than 40 percent of the rate increase. LONGLIQI is one of the most important competitors of P&G Company.