Companies need to strategize well to be in a good position to succeed amidst the stiff competition that exists in business environments today. Companies ought to carry out industrial analyses in order to develop strategically. This helps firms understand their position and the position of their competitors. Companies are also able to know the actions to take in order to gain a competitive advantage in their respective industries. An industrial analysis helps in determining the intensity of competition in a given industry, thereby informing the management of a firm to overcome the competition. This article will discuss Porter’s five forces and their application to Iluka Resource Limited. Iluka Resource Limited is a company that was started in the year 1998. The company deals in mineral exploitation, as well as marketing operations and project development (Geological Survey (US), 2011). Iluka Resource Limited is in the mineral production industry.
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Porter’s Five Forces for Iluka Resource Limited
This refers to the influence that suppliers have in the industry. The number of suppliers in the industry determines their influence. For instance, suppliers can drive prices up at will if their numbers are low since there is no severe competition among them. On the other hand, prices are bound to go down in an industry where the number of suppliers is high (Porter, 2004). It is pertinent to note that it is costly for an organization to change suppliers in a market or an industry that has few suppliers. Iluka Resource Limited is a specialist company in the production of titanium and zircon. There are just a few suppliers for the company; therefore, suppliers might have a great influence on the industry. However, there are a few companies that deal in the production of these minerals. As a result, suppliers in the industry do not have a great influence in terms of controlling prices. It is expensive for Iluka to switch suppliers.
Buyers have the power to drive prices down because there are a few customers in the industry, but the few customers are important (Henry, 2008). The impact on Iluka would be great were the customers to shift to other companies, thus signifying the power that customers have in this industry. However, there is an advantage in that the industry does not have many players, thus customers do not have many choices to switch to. It would be costly for customers to shift to other companies. Therefore, buyers’ power is not a great threat to the company’s growth and development.
This is a major factor that a company should consider during industry analysis. The number of competitors in the industry and the strength they have is a significant issue. For instance, the influence of a company in the market is limited if the number of competitors is high and strong (Henry, 2008). On the other hand, a company will be highly influential if there are a few competitors. The influence is even greater if the few competitors are weak. In the case of Iluka, the major competitors are BHP Billiton Limited, Exxaro Resources Limited, and Rio Tinto Limited. However, there are a number of other competitor organizations, although they are not as strong as the three companies mentioned above. The financial strength of these three competitor companies and the fact that they have been in the industry for a longer time compared to Iluka makes Iluka less influential. Iluka cannot dictate prices and market conditions since suppliers and customers have options.
Threat of substitution
This refers to the availability of options for customers. In this industry, there are only a few options for the titanium produced by Iluka. Therefore, Iluka Resource Limited is strong in that customers are not likely to move over to substitute products. This gives the company some advantage in that it can control prices and make higher profits.
The threat of new entry
This refers to the ability of new organizations to join the industry. It is difficult for new entrants to join when restrictions to enter a market are high (Roy, 2009). On the other hand, it is also difficult for companies to join the market when the costs of establishing operations are high. This reduces the threat of new entrants for the current players. Restrictions are few and less time is required, thus entering the market is easy since costs are few. This increases the threat of new entrants. Iluka operates in an industry where entry costs and time required in establishing operations fully are very high. This makes it difficult for new companies to join the market. Iluka Resource Limited is, therefore, in a strong competitive position since the threat of new entrants is low.
|Threat of New Entry ||Competitive Rivalry |
|Supplier Power ||Buyer Power |
|Threat of Substitutes |
Iluka Resource Limited is a company in the mining industry. This is an industry that does not have many players, thus the level of competition is relatively low. The company is well-positioned in terms of competition. Iluka makes high profits, making it financially strong. Among the reasons why the company is strong competitively and in terms of performance is the fact that it faces modest competition as a result of the limited number of players in the market. Buyers’ power is relatively low, and it is not easy for new organizations to join the market. There are also a few substitutes, giving an advantage to companies in this industry. The company has been able to thrive in its performance, despite the fact that suppliers are influential.
List of References
Geological Survey (US) 2011, Minerals Yearbook, 2008, V. 1, metals and minerals, Government Printing Office, Washington, DC
Henry, A 2008, Understanding strategic management, Oxford University Press, Oxford
Porter, ME 2004, Competitive strategy: Techniques for analyzing industries and competitors, Free Press, New York, NY
Roy, D 2009, Strategic foresight and Porter’s five forces: Towards a synthesis, GRIN, München