Assignment #1: Porter’s Five Forces in Analyzing the Industry

Laba Bubble offers a full laundry and dry cleaning service that caters to the laundry needs of its customers in Muntinlupa City. It has been in the industry for more than 6 years and has steadily improving its operations while maintaining a good number of its customers.

This analysis focuses on the five forces identified by Michael Porter which influences an industry. These forces are: potential entrants (barriers to entry), threat of substitutes, bargaining power of buyer, bargaining power of supplier, and rivalry among the existing players. Understanding these competitive forces will help the management of Laba Bubble in determining its position in the laundry industry, as well as to determine the current profitability of the laundry market. Understanding industry structure is essential to effective strategic positioning. Defending against the competitive forces and shaping them in a company’s favor are crucial to strategy.

. Potential Entrants:
The barrier to enter the laundry business is HIGH. It is very easy for a new company to enter this kind of industry since there are only few entry barriers to overcome like:

 Resources (Low capital to start up)
 Government issued permits and licenses (can be easily obtained as long as requirements are complete)
 Good location (high traffic areas are easily identified)
 No special skills required ( One can easily master the operation by a comprehensive training)

. Threat of substitutes:
The threat of substitutes is MODERATE. Substitutes are the other forms or ways on which cleaning laundry requirement is met.

 In-house laundry (when costumers opt to wash their own laundry in their houses by themselves, by their household helps or by paid “lavanderas”)
 Self-service laundry (laundromats that are usually coin-operated and can be done by the customers themselves)
. Bargaining power of buyers
The bargaining power of buyers is LOW. Buyers or customers do not greatly influence the pricing of laundry services as this is dictated by the management from the very beginning. In the laundry market, the price is normally the same among laundry shops to remain competitive with each other.

. Bargaining power of suppliers
The bargaining power of suppliers is LOW. There are a lot of suppliers of generic laundry materials in the market and their prices are relatively the same. The management also has an option to buy their laundry supplies from the supermarket. The prices of these branded products are often controlled by the Department of Trade and Industry so price increases are kept to minimum.

. Rivalry among the existing players
The rivalry among existing players/ companies is MODERATE. Even though there are a lot of laundry shops in the area, the rivalry is still moderate since each player had already established their own clientele depending on their shop location and the efficiency of services offered to customers. Competitors include Tiny Bubbles, Naza Laundry, and D.G. Laundry Haus.

CRITICAL RECOMMENDATIONS

Based on this Porter’s model, it is evident that the threats of newcomers is very high, meaning there are a lot of entrepreneurs that would and could venture on this kind of business, but other forces are still benign, making the laundry market profitable, still. Moreover, offering laundry services have always been a necessity for everyone. This is a guarantee that you will always have a portion of the market to tap. Since the threats from the entrants and substitutes are high and moderate respectively, the management needs to have an effective planning and strategy-making that can prepare them from these possible forces. The company needs to develop marketing strategies that aim to gain and maintain the loyalty of the customers thru value-added services, good customer relations, and service efficiency.