Your Strategic Plan For Success
Porter's article identifies five competitive forces, to which I've added my comments on why they accurately describe our industry:
1. Threat of New Entrants
Unlike most markets, the promotional products industry has virtually no qualifications or barriers to entry on either the supplier or distributor side of the equation. This competitive force is unusually strong for us.
2. Rivalry Among Existing Competitors
With most companies offering much of the same thing and little, if any, differentiation, there is intense rivalry between both supplier and distributor competitors for the same market share. In spite of any industry reports that state otherwise, I find it hard to believe that our market is actually growing in this economy.
3. Threats of Substitute Products or Services
It seems as if there isn't any industry supplier that doesn't sell travel mugs, bags or writing instruments. The absence of core competencies within our industry and the myriad of advertising options outside of our industry render this force strong as well.
4. Bargaining Power of Buyers
With virtually the same product being available from thousands of suppliers or distributors, someone will ultimately drop their drawers in order to win the order. End-buyers know this and use it successfully to their advantage. This force is also unusually strong.
5. Bargaining Power of Suppliers
This is where the squeeze really hits our industry. In addition to raw material cost increases, the mounting product safety and compliance regulations mean there are fewer factories that can actually deliver the quality we require. If you do not have a strong core competency and long-term relationships with key factories, your buying power is less than that of your customers. This places your margins under constant pressure.
There are too many industry firms that are unable to compete on anything other than cost, and these companies put our entire industry at risk. Those that can identify core competencies, differentiate themselves and break out of the old industry mold are the companies that have the most potential to thrive.