Free Custom «Porters Five Force Model» Essay Paper

Free Custom «Porters Five Force Model» Essay Paper

Before identifying Porter’s five forces model which is a powerful measurement of in order to understand where there the power lays in business, first strategic plan is to be defined (Michael Hitt, 2005). The strategic plan is the firm’s plan includes the directions, and formulation of strategies, and includes the decision making process by allocating its resources in order to peruse the formulated strategies, including its financial and human resources (Alex Miller, 1996). Strategic planning may involve various business analysis techniques like SWOT Analysis, PEST Analysis, and many other analysis including STEER Analysis and ESPISTEL Analysis (Alex Miller, 1996).

The Porter’s five force analysis is based on identifying five forces which are assumed to be important in order to determine various competitive powers in the business situations (Alex Miller, 1996). These five assumptions or powers includes, the power of suppliers (bargaining power of firm’s suppliers), the power of buyers (the bargaining power of firm’s buyers), competition or Competitive rivalry, the threat of substitution or substitutability, and finally the threat of new entry or entry of new competitor in the market or industry (Michael Hitt, 2005). These five forces work as stated below.

The Power of suppliers (Bargaining Power of Firm’s Suppliers):

Under the umbrella of this force, it is tried to access that how much it is easier for the suppliers of the company to control the prices of supplied goods. More the suppliers are able to drive prices, more it would be the threatened for the company. This power or force is mainly driven by the number of the suppliers in the industry (Alex Miller, 1996). If, the number of suppliers is greater, their bargaining power would be weaker. Along with the number of suppliers in the market, this bargaining power is also driven by the various factors including uniqueness of supplied goods, supplier’s strength and their control, and the switching cost from one supplier to another and so forth (Alex Miller, 1996). More thee company is dependent on suppliers on above stated parameters, more the suppliers would be in bargaining end. (Michael Hitt, 2005). Zurich Insurance is the financial services company, and bargaining power of supplier is weaker in this case.

The Power of Buyers (The Bargaining Power of Firm’s Buyer):

Same is the case in buyers if the firm is taken as the seller or supplier i.e. above stated situation is in the context that the firm is a buyer and dependency is based on sellers while if the firm being analyzed is a seller, its strength and weakness can be assessed in term of its dependency on its buyers. The bargaining power of buyers is measured and viewed in term of number of buyers in the market. More the number of buyers are there in the market, the bargaining power of buyers will be weaker as that of suppliers or sellers (Michael Hitt, 2005). The bargaining power of buyers is viewed in term of demand for goods and supply of that goods i.e. if the supply is greater than that of demand, barging power would be at buyer’s end and reverse is true. Along with the number of buyers in the market, other factors including the importance of an individual buyer to the firm (supplier), the switching cost of buyers from your products to other, number of alternatives and close competitors available in the market for buyers, uniqueness of firm’s products, and so forth. More the buyer is dependent on firm, less it would be powerful. Dependency of buyer on firm is the strength for selling firm. Increasing demand for financial services and fewer numbers of players in the market created the bargaining power of buyers stronger in case of Zurich Insurance.

Competitiveness or Competitive Rivalry:

Competitive rivalry is viewed in term of number of rivals or competitors in the market for the firm and the strengths and competitiveness of the competitors. More the number of competitors is there in the market and more their products are close alternative or close substitute to the product of firm, less the firm would have control over the situation. It is the case because the buyers and sellers may go anywhere in the market in order to fulfill their needs. In this situation, buyers and sellers are less dependent over each other (Michael Hitt, 2005). Zurich Insurance is operating in market since 1870s and is very strong group and hence is having lesser competitive rivalry.

Substitution Threat or Substitutability:

This is the threat that the customer might have certain other ways to fulfill their needs which the firm is fulfilling. This refers to the close alternatives and substitutes available in the market which are there to do the same which the firm is doing for instance: Pepsi and Coca Cola are close substitutes for each other and most customers are indifferent between these two brands. More the number of close alternative or substitutes are available there in the market; more the situation would be out of control for the firm. This is the mainly case in the perfectly competitive market. Innovations in the field of insurance and finance raise this threat for Zurich Insurance to some greater degree.

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Threat of New Entry:

The firm’s control over the prices and other factors is further moves toward weaker pool if there is free entry and barrier less entry in the industry for new firms. As it is the case in perfectly competitive market, there are no barriers for entry and exit from the industry, the firms have having the continuous threat of new entries in the market. The entry would be considered barrier less if there is less cost in term of dollar and time, required in entering in any industry. This is considered as the threat for existing player because the new player may enter in the industry an can weaken the firm’s position in the market. More the barriers are strong and durable for the entry of new player in the market; more the existing player would be at the safe end with respect to stated threat (Michael Hitt, 2005). Financial services industry required higher degree of goodwill which is the main barrier in case of Zurich Insurance against entry of new players.

These forces vary in various market structures like in monopoly, duopoly, oligopoly, and perfect competitions. The strengths for the company move from stronger to weaker pool as the industry structure moves from monopoly to perfect competition.

Internal Analysis of Zurich Insurance:

In order to use the ‘Porter’s Five Forces’ model in accessing the firm or in order to access the firm on ‘Porter’s Five Forces’, the firm is observed under the umbrella of stated forces one by one and access the firm.

The Zurich Insurance Company was incepted in year 1872 as the subsidiary of Schweiz Marine Insurance Company with the name of Versicherung Verein. In year 1975, the name of the company was changed to Zurich Marine and Accident Insurance and in 1894, as Zurich General Accident and Liability Insurance. While during 1982, the company occupies the business of Altstadt campaigned Assurances South Africa in Switzerland while in 1998, the company acquired the business of British Financial Services, owned by BAT Industries.

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The Zurich life value chain is the product line newly launched by the company, pertaining the life insurance products for individual customers in order to cover the death risk.

Marketing Strategies:

Ansoff matrix is 2*2 matrix which is basically the strategic management tool which try to link the firm’s marketing strategies with the general stra6tegic direction of the company and tried to explain four different alternatives.

This matrix attempts to make the corporate profit with stated four marketing strategies. Main logic is that the company may use one of the above strategies depending upon various conditions and circumstances in order to maximize its revenues.

Market Penetration:

Market Penetration deals with existing products and the existing customers. The market penetration is the strategy to penetrate with existing products in existing markets in which the company is currently operating. The best way to implement this strategy is to capture the market share of competitors.

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Product Development:

This strategy deals with the development of new product in existing market. This newly developed product is not necessarily new for the market as well but the product would be new for the firm. For instance: McDonald is operating in fast food market but tried to continuously introduce new burgers to its customers. When the company uses this strategy, frequently got new customers for its products and resulting in larger market share. Hence, the new product development is the crucial strategy for the firm in order to stay competitive.

Market Development:

This strategy deals with the entrance of firm in new market with existing products i.e. the developed or established product by the company is offered to new markets and/or market segments in order to maximize their revenue. For instance: Lucozade was initially marketed to the sick children and later after athletes were retargeted. The new market in not needed to be new in itself but it is new for the company.


This strategy deals with new product in new market but market is not needed to be new in itself but new for the company and similarly, the product is not necessarily be new for the market but for the company. For instance: various products offered by the Virgin Group like Virgin Cola, Virgin Airlines, Virgin Mega Stores, Virgin Communications. This is the example of entering in new market with new products by the company.


Marketing mix is the mixture pertaining four ingredients including Product, Price, Placement and Promotion, coined by Neil Borden in 1953. Marketing mix contain four elements called four P’s.

  1. Product: the product is may be the tangible (Physical objects) or intangible (Services) things product on mass level. To be retained competitive, firm must adopt the strategy term as product differentiation.
  2. Price: The price in an amount which the user of the product must have to pay for the utilization of product. The price is mainly decided by the producers but is adjusted by the market forces of demand and supply.
  3. Place or People: The place or the people are somewhat the users of the product or that for which the product is produced. It is the target market where the product is offered and is sold.
  4. Promotion: Promotion refers to the techniques or tactics used by the producer of the product in order to sale its product. It includes marketing techniques in order to create the need of firm’s product in market place.
  5. Budgetary Requirement:

Budgetary requirement refers to the rate of spending and income which is required to meet the forecast of budget. Firm’s sales budgets are the sales forecasts (in units and dollar amount) in order to define firm’s sales goals. Firm’s budgetary requirements effect the firm’s financial statements as well including the profit and loss account, balance sheet and cash flow statements. Since, marketing strategies are aimed to achieve the sales targets, effects the firm’s sales, cost of sales, current assets (accounts receivables, cash balances, inventory balances), current liabilities (Accounts payables, Notes payables) and infect the working capital of the firm as well. Similarly, due to the increase in overall firm’s activity, firm’s cash flows (inflows and outflows) are affected.


Short Term Medium Term Long Term
Porter’s Five Force Model Internal Analysis Marketing Strategies

Competitive Advantage:

The competitive advantage is the firm’s edge over its competitors. This edge allows the firm to enhance its sales and margins and retain or enhance its market share. The competitive edge the firm may have over it competitors includes reliability of products, responsiveness, tangible, assurance, empathy, customer supports, cost structure of the firm, distribution setup and so forth. More the firm is having competitive advantage over others, more it would have control over market and various market factors.



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