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Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. The Dow Chemical Company managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing The Dow Chemical Company competitive advantage and long term profitability in Chemicals - Major Diversified industry.
The Dow Chemical Company is one of the leading firms in the Chemicals - Major Diversified. Over the years The Dow Chemical Company has redefined the ways of doing business in Basic Materials. The Dow Chemical Company is listed at New York Stock Exchange (NYSE) and have a market cap 78.31B USD.
In his revolutionary article - "Five Forces that Shape Strategy", Michael Porter observed five forces that have significant impact on a firm's profitability in its industry. These five forces analysis today in business world is also known as -Porter Five Forces Analysis. The Porter Five (5) Forces are -
Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how The Dow Chemical Company can build a sustainable competitive advantage in Chemicals - Major Diversified industry. Managers at The Dow Chemical Company can not only use Porter Five Forces to develop a strategic position with in Chemicals - Major Diversified industry but also can explore profitable opportunities in whole Basic Materials sector.
New entrants in Chemicals - Major Diversified brings innovation, new ways of doing things and put pressure on The Dow Chemical Company through lower pricing strategy, reducing costs, and providing new value propositions to the customers. The Dow Chemical Company has to manage all these challenges and build effective barriers to safeguard its competitive edge.
All most all the companies in the Chemicals - Major Diversified industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins The Dow Chemical Company can earn in the market. Powerful suppliers in Basic Materials sector use their negotiating power to extract higher prices from the firms in Chemicals - Major Diversified field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Chemicals - Major Diversified.
Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on The Dow Chemical Company profitability in the long run. The smaller and more powerful the customer base is of The Dow Chemical Company the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.
When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.
If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. The Dow Chemical Company operates in a very competitive Chemicals - Major Diversified industry. This competition does take toll on the overall long term profitability of the organization.
By analyzing all the five competitive forces The Dow Chemical Company strategists can gain a complete picture of what impacts the profitability of the organization in Chemicals - Major Diversified industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail The Dow Chemical Company 's managers can shape those forces in their favor.