Porter’s Five Forces Analysis – Chinese Fireworks Industry

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Table of Contents

Threat of new entrants
Threat of substitute products
Bargaining power of suppliers
Competitive rivalry within the industry
Bargaining power of consumers
Conclusion
References

After carefully conducting Porter’s 5 forces analysis for the Chinese Fireworks Industry, the following rating was established.

Porter’s Force	Rating
Threat of new entrants	High
Threat of substitute products	Medium
Bargaining power of suppliers	High
Intensity rivalry within the industry	High
Bargaining power of consumers	Medium

Threat of new entrants

As it has been observed, the widely spread expertise and knowledge of fireworks manufacturing among the Chinese people has increased the chances of new entrants in the industry (Jiang, 2010). With the manufacturing of the fireworks having its origin at family-level, there are high chances of new firms to be established in the industry. As a result, there is high possibility that profitability in the industry will decline significantly as more firms enter into the industry (Porter, 2008).

Threat of substitute products

There are moderate chances of the products in the fireworks industry in China to be substituted. The technology adopted in the manufacture of the products is sustainable with the availability of the raw materials being of steady supply (Jiang, 2010).

However, emerging technologies have given rise to nuclear-based explosives which are higher expensive that the ones made in the firms in the Chinese Fireworks Industry. With these nuclear-based explosives being less affordable than those from gun-powder, chances are moderate that the products in the Chinese Fireworks Industry will be substituted. As a result, the substitutability of products in the industry can be rated as ‘medium’ as shown in the diagram above (Porter, 2008).

Bargaining power of suppliers

With the widespread of explosives manufacturing skills among the Chinese culture, right from the family level, there has been sustainable supply of labor in the industry (Jiang, 2010). Further, the high availability of raw materials used in the manufacture of explosives in China has made the Fireworks industry posses high bargaining power of suppliers.

As it has been observed, China’s fireworks industry is one of the potential suppliers of commercial explosives in the global markets as a result of the high bargaining power of the suppliers. With high level of expertise and wide availability of raw materials, the industry has been rated ‘high’ in the Porter’s industry analysis.

Competitive rivalry within the industry

With the availability of expertise in China for the manufacturing of explosives, high level of rivalry has been experienced in the industry (Jiang, 2010). Many firms have been established, with high level of innovations remaining explicit as firms seek to establish competitive advantage.

As a result of high level of rivalry in the Fireworks Industry in China, firms have been devising powerful competitive strategies making the industry to remain dominant in the global markets. It is the high level of competition within the industry that has contributed to high level of competitiveness of the industry in the world markets (Porter, 2008).

Bargaining power of consumers

With the economy of China growing significantly over the recent years, consumer purchasing power has increased as well (Jiang, 2010). However, government regulations on the use of explosives has controlled the purchasing patterns, making the bargaining power of consumers in the industry be ranked as ‘medium’. The dangers associated with the explosive devises, both to the environment and to individuals, can be attributed to the moderate bargaining power of consumers for fireworks products.

Conclusion

As it has been observed, the industry analysis of Chinese Fireworks Industry shows that the industry has the potential for better performance in the future. With the high level of rivalry, suppliers bargaining power and threat of new entrants, more innovations are expected in the industry as firms seek competitive advantage in their operations. However, consumers bargaining power and threat for new substitutes remain moderate, a situation which seems to regulate profitability in the industry as prices are largely controlled.

References

Jiang, R. (2010). The Chinese Fireworks Industry. Richard Ivey School of Business: Ivey Management Services.

Porter, M. (2008). The five competitive forces that shape strategy. Harvard Business Review, Vol. 7(3), p.86-104.

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