A notable element of industry attractiveness usually includes the competitive dynamics of the industry. Michael Porter classically defined five forces that drive industry competition and explaineda valuable approach to evaluating the inclusivecompetitive dynamics of a particular industry. As stated byPorter, the attractiveness of an industry is defined by five external forces, these being: bargaining power of suppliers, threat of new entrants, threat of substitute products,bargaining power of consumers and competition between present firms.The five forces to a large extent determine and influence the level and type of competition in an industry and, ultimately, the industry’s profit potential
Competition between present firms
Competition between firms is relatively low. This is for the reason that despite there being many firms, the PVC industry is predominantly made up of few corporations as a result of mergers and acquisitions, and each has a defined market share leaving the smaller firms to fight for the remaining share. Prices arefairly standardized, while the manufacturing corporations are fairly spread throughout the country, this makes their target markets less overlapping further making firm-to-firm competition less a threat.Product standardsare established and most pipe manufacturers complied with these standards that were established by the plastic pipe and fittings association. Because these pipes are standardized, the possibilities to differentiate products on features were limited. However, a big source of competitive advantage streams from the price sensitivity of the buyers. Firms that provide a relatively lower price tend to be better competitively positioned in the industry. The PVC industry is also rapidly growing due to growth in other related industries; this reduces between-firm competition.
Bargaining power of suppliers
The bargaining power of suppliers is high in the PVC industry. This is for the reason that the suppliers are few and are grouped into two broad groups; one made up of large multinationals oil, gas, or chemical corporations that were vertically integrated into resin production, while the second group is made up of smaller specialized suppliers.The suppliers also provide highly differentiated products that make it hard to substitute them. The large multinationals oil, gas, or chemical corporations are vertically integrated into resin production since PVC resin was based on ethylene. This group consists of firms such as Saudi basic industries corporations, chevron Philips chemical company and Dow Plastics. The second group of suppliers comprised of smaller specialists that customized PVC resins and purchased basic raw materials from the first group.However, other considerations such as supplier switching costs do not play a significant role.
Bargaining power of consumers
Consumers have great bargaining power in the PVC industry. The PVC industry in the U.S and Canada comprises of about 200 firms engaged in pipes, profiles and tubing producers. This provides the consumers with lots of options and forces the industry to provide the most differentiated products in terms of pricing and quality to attract, maintain and solidify their consumer base.
Threat of new entrants
The threat of new entrants is relatively low. The industry is regulated by the Plastic Pipe and Fittings Association thus entrance by new firms needs to be certified by various industry authorities. The industry is also capital intensive especially at the startup stage, therefore, it requires more capital at the initial stages. The industry is scale sensitive to some extent. Labor shipping and energy are the major cost items in manufacturing, representing roughly 75 percent of total costs. Depending on location, labor represents between 44 and 51 percent of operating cost, energy between 7 and 12 percent, and shipping from 14 to 18 percent. Finally, the efforts for entering the PVC industry are high.
Threat of substitute products
The PVC industry has minimum or no threat of substitute products. It is one of the most widely used thermoplastic polymers. PVC products are widely used in various industries and form the dominant material for use in the manufacture of pipes and fittings, sanitary sewer, and wire and cable. Therefore, this industry has no close substitute. The use of other products attracts a higher cost which most consumers are not in a position to buy, for example, metal pipes.
PESTLEAnalysis on the Higher Education Industry
The PESTLE Analysis(Political, Economic, Social, Technical, Legal and Environmental) is an analytical tool for evaluatingand assessing the influenceof external environmentson a business or a major operation and also the effect of a business on its external environment.
A rising tuition prices and student debts is a thing of concern that touched on the higher education industry in the United States. This has been as a result of the labor/people intensive nature of higher education; however, more parents are willing to pay for the cost in exchange for quality higher education.
The will by students from various countries to accept the applicability and to be enrolled to the open online courses as opposed to the conventional class-lecturer mode of teaching also booststhe higher education industry. Additionally, the willingness of various universities to adopt this form of teaching is also an advantage to the higher education industry.
The availability of digital technology that allows for the provision of online courses provides an opportunity for the higher education industry to expand through the offering of higher education to students from various countries globally.
The liberalization of the higher education industry and the reduced legal requirements for certification to start and operate a higher education institutionhas led to the setting up of many higher education institutions.
Within the higher education industry, there are many colleges which are chasing after high-achieving 18 to 24 year olds and at the same these colleges are trying to keep up with other reputable higher institutions that they aspire to become. This places a healthy competition in this industry as they aspire to improve their quality of education to be in a position to compete the reputable institution for the high achieving students.There is also competition in the high education industry in the form of alternatives. The presence of alternatives such as Straight-line, The Khan Academy and Badges to certify certain skills offers an alternative to higher education for young people.
With regards to the political macro-environment, the higher education industry has been perceived to be churningout unqualifiedgraduates with most employers considering a transcript a useless document in evaluating the candidacy of a candidate.
Ullmann, A. A. (2011). High Noon at Universal Pipe: Sell Out or Risk Everything. North American Case Research Association.