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In addition to the forces that influence customer-driven market strategies and the marketing mix, the environment of the marketplace can be further analyzed according to the five forces identified by Michael Porter. These environmental forces, according to Porter (1980), also help the company analyze the industry thereby affecting how the company formulates its strategy based on the presence of competition. The capability of the company to serve is market is therefore based on how it is able to position itself within the industry and how it can survive a competitive marketplace.
The first force is identified as rivalry.
Competition is common in any marketplace, and one of the main reasons companies need to apply marketing strategies is because of the presence of a rival. Because of this, it is important for companies to define and make use of competitive advantage in order to have the edge over its competitors. The presence of competition is important in any market, but the degree of dynamism may range from low or disciplined competition to competition that is intense (Porter, 1980).
Hence, depending on the environment according to competition as based on the concentration of rivals, a company’s performance in the market naturally gets affected.
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The second force is the threat of the substitute products. This pertains to the preferences of the customers and how they can be subject to change depending on the presence of substitutes. These substitutes may also take place when costs are switched and that the price performance may drive customers to prefer other products.
For instance, due to the economic conditions some consumers may start opting for less expensive brands or they may look for other products of similar function yet of different value such as replacing cleaning products with baking soda and vinegar.
As a result, should the company see this shift, the tendency is that the company may start developing products according to this new demand or the company may start lowering prices. Porter (1980) identified buyer power as another force. Buyer power refers to the amount of impact customers may have towards the industry.
This is to say should the industry is concentrated with too many sellers or suppliers and fewer buyers, the tendency is that the buyer has the greater power in the equation, hence, the tendency is that companies heavily execute customer-driven strategies. This happens if the buyers are concentrated, that the company relies heavily on the buyers for business, and that the buyers can opt to not purchase the products. On one hand, buyer power is deemed weak if the buyers are highly diverse and segmented and that the buyer heavily relies on the suppliers for the products and services they need.
Supplier power is another environmental force identified by Porter (1980); suppliers, this time, refer to those who provide the raw materials the companies manufacture in order to produce the products available in the market. What happens is that if the suppliers have too much power this may affect not only the capacity to produce but also the pricing of the products. Last but not the least, barriers to entry or threat of entry refers to the inability of any firm to enter any market.
Although this is not necessarily realistic, what happens is that in theory, these barriers may exist if high profiting firms have better protection in the market, thereby shielding them from any serious threat or competition. As a result, a company’s capacity may be affected especially if the industry is highly influenced by powers that somehow control competition such as, for instance, barriers created by the government, regulatory factors such as patents, and economies of scale, among others (Porter, 1980).
Customer-driven market strategies. (2020, Jun 01). Retrieved from https://studymoose.com/customer-driven-market-strategies-new-essay
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