Porter Five Forces Analysis and Bargaining Power
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In this section, we assess the cleaning industry through Michael E. Porter’s five competitive forces. The main uses of five forces are to reveal the industry’s current profitability and determine the competitive intensity. Porter’s five forces consist of the threat of new entrants, the threat of substitute products or services, bargaining power of suppliers, bargaining power of buyers and rivalry among existing. Next, the five forces are introduced and after that applied in cleaning industry of Malaysia.
Threat of Substitutes
In general, industries are more attractive when the threat of substitutes is low. This means that products or services from other industries can’t easily serve as substitutes. In contrast, when close substitutes for a product or service do exist, industry profitability is suppressed because consumers will opt not to buy when the price is too high. In cleaning industry, the threat of substitutes of services is relatively medium. Due to the numerous of residential house and office around the KL area, the growth of cleaning industry is becoming fast. In the 20th century, everyone is finding a clean, comfortable, relaxing and safe environment.
The wants of cleaning service is slowly change to a need. In the KL area, we had found that around 76 cleaning company is provide similar services compare to our company. To retain the customer, we will provide high performance of service with low price to create customer satisfaction to our service. Most of the cleaning company is focus on residential house area while our company is expand the field such as provide service to office, hotel and also hospital. So, our management team is able to overcome this threat of substitutes.
Threat of new entrant
An industry will be more attractive if the threat of entry is low. Thus, the competitiveness within the industry will low. In contrast, if the threat of entry is high due to low entry barriers, the potential of profitability in the industry will reduce. So, to reduce this threat a company should focus and invest more in the product or service to gain competitive advantage. Due to our analysis, we had found that threat of entry is high and the entry barriers were low. As we can see that, cleaning industry is growth rapidly because the need and want of customer are increasing.
A fresh and clean environment is a need and necessity for local citizen in Malaysia. To start up a cleaning company, the procedure and requirement is not complex. The manpower can easily find from that manpower agent companies and also numerous of supplier which selling cleaning equipment. To overcome this threat, our company had using natural cleaning product which consist of zero percentage chemical and toxic which won’t harm the health of customer.
Rivalry among existing firms
The profitability of an industry will be restrained due to high rivalry. Price competition will occur if the product or service of competitors is nearly identical and switching cost to buyers is low. The cleaning industry is facing high rivalry among existing firms. As mention above, there is 76 cleaning company located at Kuala Lumpur, Malaysia. The size and power among the companies is almost equal so create high rivalry in cleaning industry. Due to the similar service offered among the company, the price competition is high and the switching cost is low.
Bargaining power of suppliers
In general, industries are more attractive when the bargaining power of suppliers is low. So, the supplier won’t suppress the profitability of the industries. The bargaining power of suppliers in cleaning industry is relatively low compare to other industry. In a cleaning industry, the manpower and cleaning product are needed. These two things can be easily find at the market. For example, there is much manpower agent company and the market of selling nature cleaning product is rapidly expand.
Bargaining power of Buyers
Low bargaining power of buyers can create an attractive industry. The power of buyer can suppress the profitability of the industry if the bargaining power is high. The bargaining power of buyers in cleaning industry is high. The reason is the buyer can easily switch to other cleaning company if quality of cleaning is not polished. So, our company tend to provide a best cleaning service to retain the customer.