Porter’s Five Forces – Dell
Porter (1980) stated that five fundamental forces of competition determine an industry’s attractiveness. The five forces include the following: bargaining power of consumers, bargaining power of suppliers, threat of new entrants, threat of substitute products, and rivalry (Porter 1980).
Bargaining power of the consumers: Dell is not the only computer brand. There are many other computer brands in the market as well. This means that consumers have a great bargaining power. The simple indication is that by using their bargaining power as a powerful buyer, some customers can get hold of a high amount of the value a business creates for them by pushing down their selling prices and increasing their costs to attend them (Simister, 2011). An example of consumers’ bargaining power include customer’s size and concentration in some specific geographical areas (Karagiannopoulos, Georgopoulos & Nikolopoulos, 2005).
Bargaining power of suppliers: Suppliers tend to have a higher bargaining power, since there are no alternates to their products. Dell has to purchase the right products, even if it is at a higher price, from the suppliers they rely on, as there is no alternative option. When demand for a particular supplier’s product is more than the availability of it, the supplier can demand a higher price for their product, which also affects the business’s profits (Fung 2014). An example of this can also be the size and concentration of suppliers (Karagiannopoulos et al, 2005).
Threat of new entrants: This is a burden from a new product or service provider that can easily enter the industry and can be a major competition. (Fung 2014). For Dell, this