Eaton Corp Porters Five Forces Model

1. Competitive rivalry within the industry

The company faces significant competition from both larger and smaller companies, with the key competitive factors being customer and end-user service, price, quality, brand name and innovation.

Key Competitors of Eaton (ETN):

Cooper Industries

Danaher

Honeywell International

ITT

Illinois Tool Works

Johnson Controls

Parker-Hannifin

Rockwell Automation

Textron

United

What is Eaton's market share in the industry of focus? (Industrial Machinery)

* Fragmented competitive structure increases rivalry. Competitors are quite diverse that makes it tough to become the best in the industry and increases competition.

* Constant innovations and other industry changes heat up competition as well.

* Moderate market growth - S&P just changed their rating for Industrial Machinery from neutral to positive. Eaton started concentrating more on growing markets.

* High fixed costs - competitors need to produce near capacity to attain lower costs and sell these large quantities that intensifies rivalry

* High exit barriers - Plant and equipment assets are very specialized so they can't be sold easily and it intensifies rivalry.

INTENSE RIVALRY

2. Threat of New Entrants / Barriers to Entry

* High initial capital investment - highly specialized plants and equipment

* Patented technologies

* Economies of scale/high fixed costs

* Strict Government regulations

* Established relationships with buyers

HIGH BARRIERS TO ENTRY

3. Threat of Substitutes

* High possibility of cheaper or/and better innovative products and technologies

* Moderate Level of Buyers' willingness to substitute for standardized products

* Low Customer switching costs

HIGH THREAT OF SUBSTITUTES

4. Bargaining Power of Suppliers

Source: Mergent Horizon:

Eaton has 22

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