Business
Business
Business event industry has grown tremendously in the last few years due to proper planning and professionalism among the individuals. Event planning company is an organization which carries out the process of coordinating, controlling and managing of a particular money generating activity such as trade show, gathering and ceremonies both local and international. The planning process of this activity entails budgeting, acquisition of trade licence, planning for food and accommodation and many others. Therefore thorough analysis need to be done while considering both the strengths and weaknesses of such money generating activity, not forgetting the porters five forces model analysis of essential survival techniques of such companies. In this paper I will therefore discuss in details the implication of porter’s five forces model in relation to company’s survival and growth. This model entails five key pillars which must be considered for healthy competition and proper profit maximization of any company. The key pillars include: the threat of new entry to the market, the collective bargaining power of suppliers, the bargaining power of buyers, the threat of substitute and even the competitive rivalry.
The bargaining power of suppliers is one crucial factor which determines the growth and development of any special event industry since suppliers provide the industry with the stock. Therefore, in depth analysis of bargaining power of suppliers reveals that there are many determinants of suppliers’ power therefore, more emphasis should be put while analysing these determinants since all are instrumental to well being of any industry. When suppliers are very few, their bargaining power is high making them to have the control of the entire industry and even cause the industry to become unattractive. This is attributed to the fact that the number of products is limited making suppliers to offer low quality products at very high prices. Conversely the fewer the suppliers the lower the bargaining power. The availability of substitute for the products offered by the suppliers determines the degree of survival of any industry. If there are no substitutes for the products offered by suppliers, suppliers will have high power because they will realize that there is other person supplying another product or products which can cause threat to them. Some industries like supermarkets have variety of brands being offered to customers thereby reducing the suppliers’ power. When the price of suppliers is greater or forms an essential component of industries total cost, then the suppliers’ power is extremely high. In such situations increase in the suppliers’ price consequently leads to increase in the industries cost.
The threat of new entrants to the industry is another factor of great importance to the well being of the industry. When new supplier also called new entrant moves to the market, they will destabilizes the prevailing conditions in the market by getting a portion of the market share and even intensifying the already collision in the industry, leading to decrease of the suppliers’ power. Conversely when the barriers to entry are great then the power of suppliers is relatively low. For example increased cost of investment will prevent entry to the industry while lower cost of investment will promote entry to the industry. Economies of scale enjoyed by already existing firms promote the entry while the existing diseconomies of scale do hamper with entry to the industry. The Government policy and the regulatory policy also play a significant factor in the entry to the industry. For example the protection bestowed onto a patent holder prevents entry in the short run. Some other factors which might make it difficult for entry to the industry are: Difficulty in reaching suppliers, various methods of product branding and differentiation.
Customers with high power are able to put more force to reduce the prices and even increase the quality of the products being offered to them by ensuring they are offered at fair prices leading to decrease in the company’s profit. There are numerous factors which are responsible for the weakness and strength of customers bargaining power. When customers are very many in the market their bargaining power is significantly low and vice versa. This is attributed to the fact that the higher the customers the bigger the market hence individual customer’s effect is insignificant. Customers with high volume of orders have high bargaining power because their purchases are large making the firm to gain much profit. At the same time customers with small volume of orders generally have low bargaining power. Customers are the immediate consumers of products therefore when the products they need are being supplied abundantly by many alternative firms, they will have high bargaining power as compared to a situation where there are few alternative people who supply the products needed. Customers sometimes pose threats to the firm by backward integration, which enable them to enjoy high bargaining power.
Threat of a substitute product is very important factor which satisfies the same need. Substitute products are commodities which are manufactured by various firms but still fulfil customers satisfaction. When customers are willing and able to divert their consumption to the substitute products then their power is high as compared to situation where they are not able to switch to other products. This customer’s power is also influenced greatly by the prices and the performance of these products, i.e. The higher the prices of these substitute the higher the power of the consumers and vice versa.
The degree of collision within the industry (rivalry) determines the prices prevailing in the market, methods of product promotion and even investment in innovation of the new products. When competitors are many in the market, the competitive collision will be higher because each and every competitor will be fighting for customers and even local resources and profits but the reverse is true for few current and potential competitors in the market. The degree of rivalry will be more intensive in markets which never grow and small in size because of barriers to entry to those markets leading to much profit margins being realised by those potential and current competitors. The opposite is realised in the markets which are non stagnant and big in sizes. Buyers behaviour especially their strength determines the degree of competition in the market. High power customers intensify the competitive rivalry in the market since they control the market. Substitute’s availability is another great intensifier of the degree of rivalry in the market. When products offered in the market are highly differentiated and branded then the degree of rivalry will be minimised since there will be less price competition, but when the commodities are not differentiated and not branded in good manner then the level of rivalry will be high due to price competition. Proper utilization of the existing market capacities icreases the degree of rivalry because the market will automatically be expanded leading to ease of entry to market.
Therefore for an event company to be competitive and grow positively, then the industry should identify many suppliers so that it can have variety to choose from and even being in a position of receiving high quality products at fair prices .the industry should also brand and differentiate their products so that they can compete favourably with other competitors.
References
Truitt, W.B.(2002). Business Planning: A Comprehensive Framework and Process. U.S.A: Quorum Books.
Blackwell, E. (2011). How to Prepare a Business Plan: Create Your Strategy; Forecast Your Finances; Produce That Persuasive Plan. U.S.A: Kogan Page Publishers.
Rhonda, A Abrams, R.M. (2003). The Successful Business Plan: Secrets and Strategies. U.S.A: The Planning Shop.
Beath, J. Katsoulacos, Y. (1991). The Economic Theory of Product Differentiation. U.S.A: Cambridge University Press.
United States. Dept. of Agriculture. Risk Management Agency. (2008). SWOT Analysis: A Tool for Making Better Business Decisions. U.S.A: University of Minnesota.
