Of all the analyses on our site, Porter’s Five Forces Analysis is probably the one to which we’ve dedicated the least examples. Well, starting today, that’s about to change! This article will be our second (the first being here) example of Porter’s Five Forces Analysis in action, with the subject of choice being Bosch, one of the primary brands of BSH Home Appliances.
Bosch is a worldwide supplier of home appliances and automotive components.
As a quick refresher, Porter’s Five Forces Analysis can tell you about the profitability of a given section of the market, and the balance of power that can be found within. To do so, all we need to consider are the following 5 factors (referred to here as forces):
- buyer power
- supplier power
- competitive rivalry
- the threat of new entries/entrants
- the threat of substitution
These forces are relatively self-explanatory, but if you do need any clarification with what they mean, be sure to visit either one of the two links above.
And now, without further ado, let’s get to analyzing Bosch!
Buyer Power of Bosch Customers
Let’s first take a look at how much Bosch customers can influence the prices of products.
Most individuals have to use home appliances to some extent, as there are generally few service-based approaches to doing the dishes and vacuuming the carpet (admittedly, dry cleaners present an alternative to washing clothes, albeit a rather expensive one).
What’s more, there are many buyers of these home appliances, as opposed to just a handful of powerful ones. This gives the buyers even less bargaining power.
However, what customers can bargain with is their ability to purchase from competitors.
Supplier Power of Bosch Suppliers
What about the bargaining power of Bosch’s suppliers?
There are two factors to consider here: the number of suppliers, and the bargaining power of each individual supplier.
Bosch uses a whopping “500 or so” suppliers to source their products, and so most of the suppliers are effectively expendable.
Like with many other physical products, it is likely that they are manufactured in third world countries, giving most suppliers even less leverage to bargain with.
Competitive Rivalry facing Bosch
Bosch does indeed face a considerable amount of competitive rivalry, with companies such as Hitachi and KitchenAid also offering home appliances. However, Bosch’s diverse portfolio allows them to experiment in a wide range of different disciplines without overly jeopardizing their competitiveness.
Furthermore, Bosch’s premium German brand allows them to stand out from the crowd to some extent.
The Threat of New Entrants for Bosch
Although one might argue either way, there is very little threat of new entrants for Bosch. This is because the home appliances and car component niches are already very saturated, and dominated by extremely wealthy, powerful companies.
Without an innovative approach to entering the market, most new competitors would simply be eaten up.
The Threat of Substitution for Bosch
What about being substituted? As we discussed earlier, there are few alternatives (currently) to using home appliances, and, to add to that, car components.
However, new forms of transportation or crowd-based solutions to using home appliances might force Bosch to innovate if they want to continue thriving in the market.
That wasn’t too difficult! That’s all there is to a Porter’s Five Forces Analysis. Just individually analyze each of the five factors which can affect the purchasing of a company’s product, and you’re good to go.
Do you have experience with using Porter’s Five Forces Analysis? We’d love to hear your thoughts — let us know down below along with all your other questions and comments.