Buyer Bargaining Power

Buyer Bargaining Power

Procter and Gamble is a very large company, but anyway its future depends on buyers. Wal-Mart represents 20% of the firm's total revenue in 2008. This percentage of total revenue gives Wal-Mart the ability to bargain with the company for lower prices. But Wal-Mart needs P&G about as much as P&G needs Wal-Mart, so their bargaining power is not enough to hurt P&G's profitability. The economic downturn will not have a significant impact on P&G because of the diversity and "recession-proof" status of its products. The products that P&G offers can sustain a slowdown or recession in the economy because of the product types. Consumers will continue to purchase these goods through an economic correction.

Procter and Gamble competes through differentiation and spends huge amount of money on Research and Development, to create products that are differentiated from that of competitors, and spends heavily on advertising to emphasize the value of the company's brands. With the help of relationship with many retailers and investment in learning about customer behavior, the company is aware of what consumers want in a product, and can effectively focus R&D to create new products, and improve existing products to better meet consumer needs.

For strategic purpose, industry analysis is used to examine different segment of an industry, rather than the market as a whole, as different segments may be at different stages of the industry life cycle and may require different strategies. Porter's Five Forces is used to analyze the industry environment in this paper. The objective of such model is to develop competitive advantages of the organization to enable it to defeat its rival companies. These factors are: the threat of new entrants, power of suppliers, power of buyers, availability of substitutes and competitive rivalry.