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Bargaining Power of Customers

Essay by   •  August 4, 2019  •  Essay  •  882 Words (4 Pages)  •  14 Views

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                                         What is Porter’s model?

Porter Five Forces Framework is a tool that used in business for analyzing competition in business. It draws across the industrial organization and their intensity, competition, profitability and in-profitability.

                                     What is an Entrepreneurial Startup

An entrepreneurial startup is creating a startup from a very innovative idea that is a proven tool for startup entrepreneurs from the entrepreneurs’ personal experience and wisdom of others.  Some of the challenges that by an entrepreneurial startup based in Kenya will be facing using the porters five forces model are;

 

  1. Bargaining Power of Customers: Bargaining power is the ability of customers to drive down prices. Customers are a very major determinant in putting an entrepreneurial start-up under pressure, in features and quantity.

Challenge: If there is a little difference in the innovative payroll that has been developed compared to what is in the current market, pricing will be a major determinant in which of the two the services the customer would go for. Customers tend to go for the cheaper out of the two.

Solution: To counter customer leverage, make sure you expand your services to what your rivals don’t offer, this becomes hard for customers to leave you for a rival.

Challenge: There are a lot of payroll systems that have been developed in Kenya, in other words, there is a lot of competition, which will drive down the prices of the innovative payroll.

Solution: Use information system to achieve the lowest working cost and offer lower prices to your customers.

  1. Bargaining Power of Suppliers: Suppliers of raw materials, components, labor and services can hold significant power if the resources they provide are unique or scarce, or if there are only a few suppliers.

Challenge: Suppliers can drive up the prices of your input within a short notice.

Solution: To neutralize supplier power, standardize specifications for various products your company needs so they can switch easily among vendors.

Challenge: Employees might decide to ask for an increase in the amount in salary they collect, within a short notice, and if this is not considered they stop working for the payroll start-up.

Solution: Employee solidarity such as labour unions, can limit this or give the start up an advantage.

  1. Threat of Substitutes: Threat of substitutes refers to the ability of a customer to decide to use a different product instead of yours to solve the same problem or meet the same need.

Challenge: You are never the only alternative, hopefully just the best, in value, utility, and satisfaction.

Solution: Use Information Systems to enable new products and services, or greatly change the customer convenience in using your products and services, for instance, Google continuously offers new and unique search services on its search engines, for example google map.

Challenge:  How easy is the innovation payroll easy to copy?

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