Evaluation of the Porter 5 Forces Analysis on Britvic PLC
Porter five forces analysis helps firms in understanding the competition in terms of who are the competitors and the manner in which their products and services affects the firm and how critical it is to the company’s survival (Porter, 2008).
This essay will evaluate Porter’s five forces model and how it has been applied in the case of Britvic plc.
The essay will reveal how the porter’s five forces model informs the understanding of the performance of Britvic plc and the soft drink industry in the United Kingdom.
The paper will also include a broader reflection on Porter’s five frameworks and evaluate how useful the ideas are such as whether they enable the firms to create a sustainable competitive advantage.
The essay will also discuss the ultimate objective of strategy, whether industry analysis is useful and critiques of the porter five forces model.
From the case study of Britvic, it is clear that the soft drink industry in the United Kingdom is quite competitive and there are well established firms in the industry that are competing against the company. Some of major competitors against Britvic include AG Barr PLC, Princes limited and Coca-Cola.
The firms in the industry have well established brands such as Barr flavours, Big Willie, Coke, sprite and Fanta among others. compared with the competitors, it is clear that the company has performed quite well in that it has well-known brands of soft drinks such as Robinson’s , Fruit Shoot, Tango and Maguary (Britvic PLC, 2020).
The threat of new entry in the soft drink industry is quite low which is favorable for Britvic since it is able to maintain a significant market share in the United Kingdom (Britvic PLC, 2019). From the Porter’s five analysis, it is clear that Britvic has managed to attain economies of scale and it is thus able to reduce its costs of operation and still offer products at the standard industry prices, which help the company to be profitable.
Porter five forces analysis also reveals that the bargaining power of the buyers in the soft drink industry is low due to the low volume of purchases per individual.
To make the products available to the many buyers across the country, the company ensures that it stocks the products in many supermarkets and retail outlets to avail the products to the consumers, which further increase the company’s revenues.
The bargaining power of the suppliers is low as revealed by the Porter’s five forces analysis, which shows that the company is able to get inputs at fair prices which helps lower the production costs.
Nevertheless, it is clear from the analysis that there are available substitutes for soft drinks such as coffee and tea among others and the switching costs are low which require the Company to be vigilant in ensuring that it maintains its market share.
Porter’s five forces model is very useful to any firm and can help firms in creating sustainable competitive advantage.
Porter five forces mode helps a firm to focus on the industry features that affect the competitive environment and compromise the profitability of a firm (McGahan and Porter, 1997). By using the model company can establish itself well in an industry by reacting to the forces of competition in a favorable way.
Porter five forces analysis helps firms in adjusting their strategy in the right manner, taking advantage of their strong position and in improving the weak areas. Through the porter forces model, a firm is for example able to strategise on how to deal with the buyers and the suppliers. In an industry where the bargaining power of buyers is low, the firm can for example come up with pricing strategies that will ensure maximum profits.
Where a firm finds the bargaining power of the suppliers to be low, it can plan on getting reliable suppliers with high quality inputs at low prices. Porter five forces mode thus allows a firm to gain sustainable competitive advantage by continuously allowing planning that directly deal with competition which helps maintain the market share. The model focuses managers on the external environment rather than just focusing on the internal environment (Porter, 1979).
A Porter 5 force model is not without critique Grundy (2006) argues that the model is best applied in analysing firms with simple market structures. According to Miller and Dess, (1993) a comprehensive analysis of the five forces can be difficult especially in complex organisations and industries that have many products, interrelations and intermediaries.
The model has also been criticised for focusing the managers on the external environment more than on the specific product market segments at the micro level. Also, it is criticised for of failing to link directly to possible management actions whereby for it fails to provide the specific actions that managers should take if the companies involved do not have much influence over any of the five forces (Grundy, 2006).
In conclusion the porter 5 forces model has various benefits and in the Britvic case study, the model provides a framework that helps reveal the performance of Britvic relative to its competitors. Porter’s five model analysis provides useful ideas that can help a firm in creating a sustainable competitive advantage.
The model for example focuses managers on the external environment rather than just focusing on the internal environment. The model also helps firms to find imperfections in the markets that can offer opportunities for better returns.
