Porter five forces of RB

Porter five forces can be used by RB to determine how all these five forces can influence and develop a
strategy to gain competitive advantage over other FMCG’s, along with a long term profitability plan.

New Entrants:

FMCG has comparatively greater chances for new entrants because of the wide market, RB defends
those entries through low price strategy and also through adding value propositions to the consumer.
Innovation is also the key that helps them keep their position. The industry in which RB operates
requires a lot of capital furthermore the place where RB is right now, to achieve that place a new
entrant will take at least 10 to 15 years so we can safely assume very few new entries in the market. The
policies and government restrictions for home and hygiene products are very strict and requires legal
work and license in order to start selling the product in the market. RB take advantage of their
established and successful brand name to deal with the new entrants and the high cost of setting up the
business is enough to weaken a new entry itself.

Bargaining Power of Suppliers:

Strong suppliers use their position efficiently to earn maximum from FMCG industries. RB uses efficient
strategies to overcome these challenges such as using several suppliers at a time to avoid relying on one.
Also by introducing new product designs, if the price goes up of a particular raw material then they can
use the other one. Developing good relations with the supplier is also another way to have a strong
hold. The industry in which RB operates makes them the regular customer for its supplier. Supplier’s
profit is dependent on the industry’s profit therefore suppliers quote reasonable prices which implies
that they have a lower hand within this industry.

Bargaining Power of Buyers:

Buyers always want to buy the best for them, by paying minimal amount they want the best product.
The smaller the customer base the stronger the power of buyers get. RB make sure that they have a
large customer base and that their customers are brand loyal. Regularly coming up with new product
also allows RB to limit the bargaining power, it also give RB an edge to charge premium price for their
product as they are the one to introduce that product in the market. The market that RB target is more
concerned with quality rather than price which implies buyers are less sensitive to price. RB make sure
that they provide premium quality to retain their customer.

Threat of Substitutes:

Whenever a new substitute enters the profit margin from the market is divided accordingly. RB offering
unique products makes it more obvious that they will have a substitute to deal with. RB deals with
substitutes by providing better services to their customers. By understanding customers’ needs and
offering them the best solution as soon as possible. RB differentiate their products on the basis of their
quality. The high premium they charge for some particular products such as Veet and Dettol, they use
that premium for research and development which helps them to keep ahead of their substitute brand.
Threat of substitute is high but their continuous improvement in the product categories helps them to
take lead.
Rivalry among the Existing Competitors:

FMCG operates in an environment which is very competitive so they face price wars internally which
brings down the overall profit of the industry. RB is taking care of internal rivalry through building a
sustainable business plan and collaborating with potential customers to expand the market. The
competition in the market is really high and the competitors are real big threats so RB can’t charge as
such premium price against LUX or Lifebuoy because they have a much bigger sales forces compared to
RB, so the price is set according to the market trend. So competition is rated to be high.