How Porter's forces contribute to the SWOT analysis

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Coca-Cola is yet another good example. The SWOT analysis shows that Coca Cola holds a very large market share but does not go further. Porter brings necessary information for the company. For his Coca Zero product, Porter shows that the consumer target is male between the ages of 18 and 35, which represents a large portion of the world's population, and Porter even learns that in this case, the power of customer negotiation is very weak. Porter highlights additional information and contributes to in-depth competitive analysis by helping SWOT analysis.

Bargaining power of suppliers

It characterizes the ability of suppliers to impose their own conditions (costs, quality level, etc.) on a market. This force directly impacts the profitability of a company.

Their influence is all the stronger when their number is small or when they are concentrated.

When their products are well differentiated and they benefit from a strong brand (The cost of transfer from one supplier to another is high for the company). When the company's order volumes from suppliers are low compared to the market but remain an important part of the company's purchases or the absence of substitute raw material.

The more the suppliers are organized between them ("agreements" or cartels), the more difficult it is to negotiate with them. They can for example agree on a decrease in production in order to increase prices. In this sense, a company must always seek to diversify its portfolio of suppliers in order to be the least dependent possible.

The bargaining power of suppliers is very important in a market. Strong suppliers can impose their conditions in terms of price, quality and quantity. Conversely, if there are many suppliers, their influence is weaker. We must analyse the number of orders made, the cost of changing suppliers, the presence of substitute raw materials, ....

Another good example to demonstrate this is the Apple iPad 2: As it was very rare, apple suppliers have no bargaining power.

All the negotiation takes place in the other direction, by the gigantic quantities ordered, the apple can afford to negotiate preferential tariffs which the competition cannot compete with (hence the low price of the first iPad 2).

When we take the SWOT of the iPad 2, we notice in the forces that it is undeniable that today own an Apple product is fashionable or that a tablet at 489 euros is one of the tablets. cheaper market.

Porter brings us additional information on the bargaining power of the suppliers which is a strength but which did not come out in the SWOT, which is why we note in this case that Porter's forces contribute to the SWOT analysis.

Competitive Rivalry

Intra-sectoral competition corresponds to the different competitors in the same field of activity.

The intensity of competition depends on the size of the company, the growth of the market, the differentiation of products .... It assesses the intensity of competition between firms in the same sector and varies according to each factor. If a market is in place then the competition will be stronger. When market growth is strong, competition becomes less important. The more unique the product, the less intense the competition.

This force is directly felt by the companies, it is the direct competition. It is often the most palpable, especially with lower prices, the launch of new products or advertising campaigns.

Within a sector, competition between firms determines the attractiveness of the sector. Companies struggle to maintain their balance of power. Competition evolves with the development of the sector, diversity or the existence of barriers to entry. In addition, it is an analysis of the number of competitors, products, brand identity, strengths and weaknesses, strategies, market shares, ....

Furthermore, the field of streaming music is particularly interesting. The democratization of digital music and the dematerialization of physical music (like the discontinuing of CDs) have enabled the creation of a streaming platform, the leader being Spotify. Obviously, intra-sectoral competition has been set up in this area. Spotify's SWOT analysis shows in the threats that Apple bought Beats Music, which then had only 250,000 paid subscribers against 10 million for Spotify. He then becomes a competitor but remains largely leader of this market. However, Porter's intra-sectoral analysis shows that Apple plans to invest not less than 400 million in this project to compete directly with Spotify, the world leader. Thanks to the work of Porter's forces, the analysis is more thorough and then contributes to SWOT's analysis to go further in competitive analysis.

Threat of substitutes

Substitute products are considered an alternative to market supply. These products are due to changes in the state of technology or innovation. Companies are seeing their products replaced by different products. These products often have a better price / quality ratio and come from a sector where high profits are made. These substitute products can be dangerous, and the company must be able to anticipate to deal with this threat.

Substitute products can prevent companies from increasing their prices, so their profits. They make it possible to have a price of equilibrium and to think about the evolutions of the offer of products or services.

The example of Uber Eat is interesting, indeed, because the SWOT analysis of the home meal delivery service shows that alternative services are weighing on society, the new forms of home-based meals, the main competitors like Deliveroo, Take Eat Easy, the clean delivery modes of some restaurants and the exclusivities of other competitors. These different services are identified thanks to the SWOT analysis which forgets certain factors. Porter's forces will then contribute to the identification complete of the competition. Porter's analysis shows that new ways are going to be used for this market, in this case, the rise of drone use in recent years have given ideas to some indirect competitor (like Amazon Pantry) who is experimenting home delivery by drone.

This is why a Porter analysis is necessary and contributes to the SWOT analysis and allows the company a wider knowledge of the different service or substitute product. The case of drones can then become an axis of innovation for a company like Uber Eat.

Potential Entrants

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