Question

Using the Five Forces model, select ONE of the forces and describe how a company that makes bottled water would be impacted (minimum 200 words)

Answer 1

Porter's Five Forces is a tool for understanding the competitiveness of your business environment, and for identifying your strategy's potential profitability. When we understand the forces in our environment or industry that can affect our profitability, we will be able to adjust your strategy accordingly. The five forces are:

1. Competitive Rivalry
2. Supplier Power
3. Buyer Power
4. Threat of Substitution
5. The threat of New Entrant

Buyer Power asks the question to the producer or seller that how easy it is for buyers to drive their prices down. How many buyers are there, and how big are their orders? How much would it cost them to switch from their products and services to those of a rival? Are their buyers strong enough to dictate terms to them? When the buyers are less, they have more power, however, if the buyers are more or the seller operates in multiple markets, the seller has more power.

In the case of bottled water, buyer power depends on where the market is. If the market is an individual and residential area, the buyers have more power as they would not depend on the bottled water because of the availability of purifiers and municipal water supply, however, in case the market is an industrial area or a group of companies, the seller has more power because the people working in organizations tend to rely on bottled water as a means of safe drinking.