Porters 5 Forces. P&g

Industry Analysis. Porter's 5 Forces

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.

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.

Supplier Bargaining Power

A codependent relationship exists between P&G and its suppliers. In order to generate above average revenues the Company needs various quality materials for product production at the best prices available. Suppliers of these materials also need key customers like P&G for profitable revenue generation but will most likely have little bargaining power because of its size. P&G can use its generous size and available cash to its advantage.

Threat of Substitutes

There are considerable substitutes for all of P&G's product offerings, creating an intense competitive environment. In order to differentiate itself, the firm must continue to provide new, innovative products and branding to the customer. There are products that emerge in the market that could perform