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Market Leader: Porter’s Five Forces Expository Essay

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Updated: May 25th, 2019

A market leader is a company, product or a brand that has the largest percentage in terms of market share in the market. It mainly dominates the competitors in various respects.

This could be in terms of prices, profits, perceived value, image and customer loyalty. There are several pros and cons of being a market leader. One of the advantages of being one is that the leader develops a reputation for being the preferred brand or company of the entire marketplace.

The market leader is also identified by its customers as having the best products. The market leader is also in a position to be preferred by the distributors and retailers.

This is because it would be easier to establish relationships with them. Consequently, this would increase the revenue of the company and increase its chances to open up sales outlets elsewhere.

Some of the disadvantages include the fact that the market leader is looked upon by the customers with great expectations. Therefore, it is always under great pressure as it strives to maintain high standards and tries to maintain its position as a leader.

In order to identify a market leader, it is necessary to examine which brand or company (within the same industry) is most preferred among the customers. The customers require knowing who the market leader is.

This is because customers normally develop loyalty over market leaders. Customers normally associate the market leader as the firm or brand that provides the best services or commodities.

Porter’s Five Forces

The first force is the threat of new entry. The hotel and hospitality industry (restaurants) is a market with high returns and attracts many new entrants. McDonald’s Company faces this threat since it is not too expensive and there are low barriers to entry.

Although experience is required, it could be easily accessed through training. The second one is the supplier power. This is examines the ease at which the suppliers drive up the prices (Gurndy 34). This is determined by the number of suppliers, the uniqueness of their goods and services and how much control they have over the company.

In the hotel industry where McDonald’s thrives, there are substitutes and there are many suppliers. Therefore, the bargaining power of the suppliers is low.

The third on is the bargaining power of the customers. This describes the ability of the customers to pressurize the company. This would mean that the customers are sensitive to changes in prices.

Since what McDonald’s sells is a homogeneous product, the customers’ bargaining power is high. The other force is competitive rivalry. This describes the number and capacity of the company’s competitors.

Despite the fact that McDonald’s is renowned for its great services and products, it has many competitors who offer attractive products and services. Therefore, the competitive rivalry is extremely high.

Lastly, there is the threat of substitution. This is the situation whereby the customers have the ability to find different ways of doing or getting what the company offers.

McDonald’s faces this threat since customers could get substitutes for the products. The difficulty encountered in applying the model is the fact that McDonald’s appears to face several threats and yet it still appears as a market leader.

Segmentation – this is one of the marketing strategies. It involves dividing a huge target market into groups of customers with similar needs. Examples of these subdivisions could be in terms of age, gender, location or income. A company could then come up with marketing campaigns that would target the specific subset of customers.

Targeting – this is whereby a particular group of customers are targeted for purposes of marketing. An example is targeted advertising. This is whereby companies place advertisements in order to reach customers with a particular characteristic. This could be in terms of behaviour, demographics or psychographics.

Positioning – this is a marketing strategy that involves the creation of an image in the minds of the customers in terms of the goods, brand or firm (Ries and Trout 56). Examples include value positioning, quality positioning and competitive positioning.

Repositioning – this is also a marketing strategy. This is whereby the identity of the product is changed completely. This is usually done in relation to the identity of the competing products. It is done in order to create a different picture in the minds of the customers.

It involves the entire organization rather than a product line. An example of repositioning includes where company changes from investment to a different industry such as the banking industry.

Anticompetitive practices

One of the anticompetitive practices used by firms is through dividing territories. This is whereby two companies agree to keep off each other’s way in order to reduce competition. Another practice is price fixing.

This is whereby companies or parties within the same industry agree to purchase or sell goods or services at a particular fixed price. The other practice is dumping.

This is whereby industries export products at a price lower than that in the home market. It could also occur when the product is sold in quantities that are not usual.

Works Cited

Gurndy, Tony. “Rethinking and reinventing Michael Porter’s five forces model.” Strategic Change 15.5 (2006): 213-229. Print.

Ries, Ann, and JohnTrout. Positioning: The battle for your mind. New York: McGraw-Hill, 1981. Print.

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