Marketing Forces

The toy manufacturer faces many financial demands for equipment, large operating and storage space, staff expertise, supplies or raw materials, and industry compliance. The coffee shop, on the other hand, needs a relatively small space, enough equipment to brew coffee, pass government health and safety inspections, and as little as one part--time employee with minimal experience. With the relative ease of opening a coffee shop, there are few barriers for competitors to open coffee shops nearby, or perhaps even on the next block. Computers become faster, lighter, and greater in storage capacity almost overnight. They have also eliminated the necessity for radio or stereo, and television. Not only can DVDs be watched from home computers, our favorite television programs can be downloaded for a monthly fee that is competitive with the cable companies. Radio stations can be accessed online with more variety than the local selections offered in each region, on home stereos or portable radios. Technology changes so rapidly that the third force, the threat of substitute products becomes an ongoing concern.

The power of buyers is a force that depends upon the commonness of what is being sought. A cruise ship has fewer potential buyers, mostly limited to cruise lines, than a fourteen foot fishing boat with a new design. The price the shipbuilder sells the vessel for is determined by what the cruise lines are willing to pay. The cruise lines have great ability to influence the builder, and therefore great buying power. If one buyer of the fishing boat is not willing to pay a particular price, there are several other anglers who will see the product as a great value. In the instance of the fishing boat, the buyer has little power or influence over the boat manufacturer’s selling price. While the cruise lines can exert great power as a limited group of potential buyers, the shipbuilder also has the fifth force, the power of suppliers on its side. This is due to the fact that there are limited numbers of shipbuilders. Each of the five forces exerts more or less influence on a business, depending on the size, industry, and strategies used to remain competitive.