Understand what are the 5 forces to wear
Here is a transcript of this video.¨
The model of the 5 Forces of Porter created by Michael Porter
Hello and welcome to this new video of "Draw My Economy". Today, I'm going to talk about the forces to wear. Do not forget to put an inch up and share this video. It helps the chain to make themselves known.
My cousin Eglantine has a passion: plush bear. This passion has taken so much room that she decided to live. She creates her plush bear business. To start, she did a market study and designed her model.
# 1 Supplier trading power
She had a hard time finding an industrialist to make the bear. But she ended up going there. They worked on a prototype that is ready. However, the industrialist can not make small volumes. It will only launch production for volumes of 200,000 minimum bear, at once. For this volume, it agrees to sell the Bear at 1 € to Eglantine, 30% must be paid in advance, the rest on delivery.
This is the first strength to wear: supplier bargaining power. Here it is very strong because Eglantine has not found other industrialists to work with her, her business is still too small.
# 2 The bargaining power of customers
She is now looking for customers. Given the volume it must achieve. His first reflex is to go see a big seller. She gets an appointment with an Amazon buyer, the appointment is going pretty well. The buyer loves the model, he thinks about 200000 the first year.
For Eglantine, it was unexpected, however, the buyer wants that eglantine to provide him with the product of 15000 units for 2 € the unit payable at 60 days. Eglantine will have to advance the money of the bears manufacturing to sell his stock little by little in Amazon, she has just discovered the second strength to wear: the customer. A too important customer who suddenly has a very important bargaining power on the price and conditions of sale.
# 4 The threat of substitute products or services
Eglantine is a little worried, it nevertheless makes a crowdfunding operation and gets the 200,000 € necessary for production. The bear arrives on Amazon. Startup is pretty good. Eglantine sells 20000 bears the first month. Then 17000 the second month. The bear ranks even at the top 100 sales of the "Children's Toys" category.
But the third month, a plush tiger takes its place. Sales fall by 20%. 13600 copies instead of the 15000 planned, it is the third force to wear: the threat posed by a substitute product or service. Eglantine begins to worry a little.
# 4 The threat of potential entrants on the market
To relax, it turns on the TV and falls on a Mattel ad: the toy giant will launch a teddy bear. Eglantine is collapsed. She still has 149400 bears for sale with the tiger tiger competitor, he might stay 27000 bears on his arms. What will happen now that Mattel enters the game? This is the 4th force to wear: the danger of seeing new entrants.
# 5 The intensity of rivalry between competitors
Eglantine returns to the Amazon buyer to sell his stock. This one offers it an advertising transaction. It will have to spend 5000 € to improve its visibility on the site. Eglantine hesitates. But, she learns that the plush tiger will make this advertisement next week. It therefore accepts without knowing, Eglantine has just been submitted to the 5 forces to wear: 5 external forces that will influence his strategy and the health of his company:
the trading power of suppliers,
that of customers,
substitute products,
any new entrants,
and intra-sectoral competition.
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