The Porter’s five force analysis tool is an influential tool to understand the various power points and loop holes of any organisational structure. Moreover, it helps to understand the strengths of the current market position, and the future aspects of expansion of the business. When the management of a company has the real time information about where the actual power of the company lies that is helping the company to grow, steps can be easily taken to take advantage of those factors in a more enhanced manner.
Porter’s five forces analyse the strong points of a company. Traditionally, the analysis is used to take notice of new product launches, upgrading of business services, and appropriate balance of power. In case of Worley Parson’s, the Five Forces Analysis determines the competitive power of the group. These are as follows: Provider control: in this case, the power and control of the suppliers of Worley Parsons to drive the prices of the final product or services from the company is assessed.
In the case of Worley Parsons, the number of suppliers is huge for every sector the company is doing business. This is further affected by the uniqueness of the products that are supplied to the company by these providers or suppliers. As a rule, the lesser number of supplier’s, the less influence they have on your product prices. Buyer Power: This issue is concerned with the power of buyers which has the capability to control the prices.
In the case of Worley Parsons, the end buyer does not have much power to influence the product prices. The reason for this is that the cost of switching from the company’s products to some other company to the buyers / consumers is almost the same in this case. Competitive Rivalry: There are a number of large multinational companies that are working in the same field as Worley Parsons. However, Worley Parsons has been a market leader since a number of years and has been performing consistently.
The company has strived to maintain it product quality, which ensures little competition from other companies. Also, at the same time, the company has from time to time launched new products and entered into new fields, which has made its market position much stronger. Threat of Substitution: This is exaggerated by the capability of the end product consumer to device or discovers a new way of doing particular task done by the company.
For example, if a company creates new software that automates an important process, the consumer may find a different method for automation and thereby do not needs the company’s new software anymore. Since basically Worley Parsons is an Engineering company that deals in EPC contracts, power, minerals, hydrocarbons, the consumer does not really have a choice with him. At some point in time, it might be possible for the end consumer to switch to a different company but the threat of substitution is less in this field.
Threat of New Entry: the market position of Worley Parsons will also be affected by the entry of new companies. Although it is a huge financial stake for a company to enter into field, but subsequently, more of competitors will be a threat for the Worley Parsons in the long run. If it costs little in time or money to enter this market and compete effectively, if there are few economies of scale in place, or if Worley Parsons has little protection for the major technologies, then new competitors can quickly enter the market and weaken its position.
If the company has strong and durable barriers to entry, then it can surely preserve a favourable position and take fair advantage of it. Therefore, we see that it is important for the company to analyse Porter’s five forces, and to make a complete examination of the future investments. The analysis of Porter’s five forces helps to understand what the company can do in order to make a decent amount of profit and market share.
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