Question

We are planing to start a manufacturing business that will produce edible Straw which made by wheat and other ingredients. Our main focus is to produce environment friendly straw that will not pollute our environment. Please analysis PESTEL and 5 FORCES MODEL of Porter of our business.

Answer 1

Pestel and Porters 5 forces are basically the tools that the companies can adopt to improve their competitive positions in the market.Pestel mainly focuses on how the various macro economic factors affect the business and its competitive position.Porters 5 Forces identifies the power in the competitive market or in simple words porters 5 forces helps the company to identify their strngthness and weakness and helps to improve their business and competitive positions.The five forces in Porters 5 Model are industry competition,New players in the industry,power of sellers ,power of buyers and the threat of substitutes.If there is high degree of industrial competition then the profits will be low as the power of the companies which are competing will decrease. New players and new entrants also reduces the competition of the companies .It is more profitable for a firm to conduct their business where they are fewer market players.The supplier power means the power of the sellers to sell their product in the market.If there are fewer suppliers in the market it implies more power for the sellers.The buying power of the customers refers to the bargaining power of the customers.If the customers have more bargaining power it will bring the price of the products down .The threat of substitutes is also very crucial which determines the profitability of the business.If there are more substitutes for the product available it poses more threat to the profitability.According to Pestel the various macro economic factors such as political factors,economic factors,socio cultural factors ,legal factors,technology and environmental factors that affects the profitability of business.Pestel Analysis asks the firms,managers and financial experts to analyze these macro economic factors before starting a business.In the above question the product is edible straw made by wheat.Edible straws are not so common in the the market currently

Thus by analyzing the porters 5 forces it is profitable to start the edible straw business as it will attract more consumers and as it causes less environmental degradation.