Chemical Industry Analysis Using Porter’s Five Force Model

Read Summary

The threat of new entrants in the chemical industry is low due to factors such as high capital requirement, demand for quality products, government regulations, patent regulations, and requirement of huge human and research capital. The bargaining power of suppliers is moderate due to the industry’s dependence on few large suppliers for raw materials and limited substitutes. The bargaining power of buyers remains moderate due to the major inputs in the industry, switching costs of suppliers, non-highly differentiated chemical products, and more end users. The threat of substitutes remains weak due to the buyers’ need for the same type of chemicals, high R&D costs for changing chemical compositions, and rarity of substitutes. The industrial rivals in the chemical industry are high and tend to increase with factors such as high competition in market share, global influence, high economics of scale, and high fixed and existing costs.

Table of Content

Threat of new entrants in chemical industries can be seen as low, various factors influencing the lower threat are: 1) High capital requirement to run the company. 2) Demand for the quality products, that require maximum efficiency and effectiveness, which is difficult to attain. 3) Government regulations and restrictions. 4) Patent regulations. 5) Requirement of huge human capital, and research capital.

Bargaining power of the suppliers can be seen as moderate, mall)Jar factors influencing the bargaining power of the suppliers are: 1) Chemical industry mostly depend of few large suppliers for raw material supply. 2) Substitutes are very limited. 3) Majority of the suppliers are not dependent in supply chain. Bargaining power of the buyers remains moderate, and there is less chances in increase or decrease in bargaining power, the factors affecting bargaining power are: ) Chemicals are the major inputs in the company. ) Switching cost of the suppliers are more, because of long term agreements. 3) The chemical products are not highly differentiated. 4) The chemical industries have more end users. Threat for substitute remains weak, and in long run varies with the demand, the major factors affecting the substitutes are: 1) The buyers need the same type of chemicals for their usage. 2) Changing chemical composition involves more R&D costs. ) Substitutes for the chemicals are rare.

The industrial rivals in the chemical industry is high, and have more tendency to increase, reasons beyond the high rivals are: 1) High competition in gaining market share. 2) Majority of the players are globally influenced 3) Economics of scale is high, so more competition in pricing strategy 4) Fixed costs are high, maintenance and existing cost are high. Chemical Industry Analysis Using Porter’s Five Force Model By Misinterpreted

Cite this page

Chemical Industry Analysis Using Porter’s Five Force Model. (2017, Aug 17). Retrieved from

Remember! This essay was written by a student

You can get a custom paper by one of our expert writers

Order custom paper Without paying upfront