Free Essay Sample «Benetton: Competitive Analysis based upon Porter's Five Forces Model»

Each company needs develop a strong marketing strategy. This strategy is important in order to gain profit as well as to attract new customers. The Five Forces model focuses on how five forces in an industry (buyers, suppliers, new entrants, substitutes, and rivalry) impact each other, not how they impact an individual firm (Ahlstrom 131). In fact, some of these forces are seriously constraining profitability of many companies. Nevertheless, United Colors of Benetton is classified as an example of global expansion by successful management (Sokolowski1). That is why it is important to analyze how Benetton manages these five forces.

First of all, it is important to analyze bargaining power of buyers. Buyers are extremely important for each company, because their number usually influences the company’s profit. Benetton has a wide range of customers, because it is an experienced Italian produces of high quality design clothing, which is active since the early1960s (Sokolowski 1). Bargaining power of suppliers is another component of these Five Forces model. Suppliers are those firms or individuals that provide input into the creation of the industry’s output (Ahlstrom 133). Therefore, Benetton has a strong base of suppliers, who have been cooperating with the company for many years. That is why this company s famous for its high quality as well as sophisticated designs (Sokolowski 1).

There is always a serious competition in any business. That is why it is important to be particularly careful about new entrants. If an industry is experiencing high returns, then other firms will wish to enter that industry and they believe that they may be able to make similar or better returns (Ahlstrom 133). The threat of substitutes is also important in any business. It is a serious problem when some company creates a product, which can replace you from the market. One of the most popular tricks is to lower the price, which can help the rivalry company to attract your customers. Nevertheless, there are many barriers for entering the same industry. For example, Benetton has been established for more than fifty years ago. In addition, the company managed to effectively develop international markets like South-America, Asia or Africa (Sokilowski 1). Thus, it would really be hard for some new company to create a serious competition for such a strong brand as Benetton.

Rivalry and competition among different firms is a very important element of the Five Forces model. That is why differentiation is one of the most important factors for effective business. If firms in an industry can differentiate themselves from each other, rivalry is lowered and profits increase (Ahlstrom 136). That is why it is always important to be creative and innovative in order to preserve and increase the number of customers. In fact, Benetton has a very unique advertising strategy, which differentiates it from other companies. The advertisements of Benetton are not only about clothes, as the fight against racism and discrimination became almost more important than clothing itself (Sokolowski 1).

All in all, United Colors of Benetton is an example of the company, which was able to successfully establish marketing strategy, which can easily overcome these five forces. Of course, these forces can seriously affect profitability of many companies. Nevertheless, Benetton has more than fifty years of experience in the clothing industry. That is why it already has a strong base of regular customers, who are confident in the design as well as materials of Benetton’s clothes. In addition, Benetton has a unique advertising strategy, which differentiates it from potential rivalries. Overall, despite the five threats the company is able to successfully develop its business.