The Porters Five Forces Competition Model Essay

The Porters Five Forces Competition Model - Essay Example Since the government is protecting the industry because of the high tax rate imposed on fine fragrances, it would be harder for the consumers to have a bargaining power over the price of related products. The local consumers are left with no choice but to avail these items at a high price or simply use non-branded perfumes or colognes. Therefore, the bargaining power of the buyers on fine fragrances is low. Â  The bargaining power of suppliers is also low because there are a lot of suppliers available in the area competing to supply the raw materials for the big producers of Fine Fragrances like Channel, YSL, Givenchy, etc. Since there are a large number of suppliers in the area plus the option of finding a supplier in other countries, the competition among the suppliers of raw ingredients is very high. (See Chart I – Fine Fragrance Industry on page 4) Â  Buyers have a medium bargaining power over the retailers of fine fragrance products because the local consumers have the choice of paying high prices from a legal distributor and/or to buy the same product from grey market traders at a lower price. Â  There is a high threat of substitute because of the grey market traders. These people are selling the overproduction of fine fragrances at relatively low prices than those being sold from an authorized dealer. Â  The suppliers have a medium bargaining power. This is because they have the option to sell their products directly to the authorized dealers and/or the overproduction of fine fragrances are sold in grey markets at a lower price. (See Chart II – Retailing Fine Fragrance Industry on page 6) Â  Jennifer Lopez was very successful in launching a perfume that was designed to capture the market for young women between 15 to 24 years old back in September 2002. (Wagner, 2006; Lloyd-Jones, 2005)