In: Finance
Perform Porters 5 force analysis on ADP (Automatic Data Processing, Inc.)
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 Automatic Data Processing, Inc. can build a sustainable competitive advantage in Business Software & Services industry. Managers at Automatic Data Processing, Inc. can not only use Porter Five Forces to develop a strategic position with in Business Software & Services industry but also can explore profitable opportunities in whole Technology sector.
Threats of New Entrants
New entrants in Business Software & Services brings innovation, new ways of doing things and put pressure on Automatic Data Processing, Inc. through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Automatic Data Processing, Inc. has to manage all these challenges and build effective barriers to safeguard its competitive edge.
Bargaining Power of Suppliers
All most all the companies in the Business Software & Services industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Automatic Data Processing, Inc. can earn in the market. Powerful suppliers in Technology sector use their negotiating power to extract higher prices from the firms in Business Software & Services field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Business Software & Services.
Bargaining Power of Buyers
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 Automatic Data Processing, Inc. profitability in the long run. The smaller and more powerful the customer base is of Automatic Data Processing, Inc. the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.
Threats of Substitute Products or Services
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.
Rivalry among the Existing Competitors
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. Automatic Data Processing, Inc. operates in a very competitive Business Software & Services industry. This competition does take toll on the overall long term profitability of the organization.
By analyzing all the five competitive forces Automatic Data Processing, Inc. strategists can gain a complete picture of what impacts the profitability of the organization in Business Software & Services 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 Automatic Data Processing, Inc. 's managers can shape those forces in their favor.