Encore wire corporation
There are low barriers to entry in the cable and wire industry which makes it easy to establish a business within the sector (Bunten, Donaldson & McDowell, 1974). Newcomers focused on creating specialized products coupled with a talented staff attract clients willing to try new products. Moreover, the industry takes advantage of the economies of scale and innovative technology to increase productivity at lowered operational costs as an economic growth strategy for newcomers (Agarwal, 2017). Also, the entry requirements need expert knowledge which is easily offered through training. Hence, it is easy for a new company to begin its production. Notably, existing players are actively involved in technological advancement to satisfy the changing needs of the market. Also, the current producers enjoy the cost benefits associated with their previous activities in the industry. Therefore, new entrants can easily penetrate the wire and cable market with the appropriate technology while innovation enables existing competitors to increase their profitability margins.
Power of Suppliers
The wire and cable in the building industry have a moderate number of suppliers. The suppliers have low bargaining power because of the similar products offered by competitors in the sector. Also, the players in the market have the option to substitute or change their suppliers to acquire affordable and improved products. The moderate number of suppliers implies that buyers have a choice to switch suppliers and suppliers lack the power to control the pricing of the products. Consequently, they play a neutral role in the industry
Power of Buyers
Buyers influence the pricing and quality of products offered by in the wire and cable building industry. The changing market and increased demand for wires and cables in the building industry indicates an increased number of buyers. In this scenario, buyers have high bargaining power because of the bulk orders made by large construction companies. The sector contains homogenous products which are complicated in differentiating from competitors’ products, hence easy to substitute. Also, buyers in the wire and cable industry have a low switching cost. Clients can purchase substitute cables at similar prices from competitors firms. Therefore, the buyers contain more bargaining power in the industry.
Power of Substitutes
Technological advancements have contributed to the threat of product substitution. Encore Wire Corporation (2018) recognizes the influence of innovation to create new commodity products. Emerging trends show the need to offer quality and affordable cables in the industry that adapt the green technology concept. Notably, the demand for lighter, cheaper and environmentally friendly products provides an opportunity for innovative companies to meet the requirements of its customers. Hence, new entrants could focus on creating energy-efficient cables to meet the current market demand. Customers might prefer environmental friendly and energy efficient products to enhance their environmental protection and sustainable development strategies. Also, the increased demand for both copper by aluminum as a preferred element in the production of wires and cables gives Encore a competitive position since it specializes in the production of both metals.
Intensity of Rivalry
The wire and cable industry is highly competitive. The products offered by most competitors in the cable and building industry are not highly differentiated which results in decreased customer loyalty and commodity products. The increased research and innovation efforts to produce quality, affordable and environmentally friendly products enable competitors to stay active in the market (Business wire, 2007). Also, the low barriers to entry into the industry encourage newcomers to diversify their products to attract their client base. On the other hand, the high cost of leaving the market discourages competitors from exiting the market, which intensifies the rivalry.
The products in the wire and cable industry are differentiated based on their quality, affordability, and range of items. Notably, customers have a low switching cost; hence, competitors strive to maintain their client base. Companies apply efficient marketing, pricing, and management strategies to increase their market share and acquire a competitive position (Ripsam& Bouquet, 2016). Encore maintains its competitive advantage by offering its customer an expanded product line within affordable ranges. Also, its business ethics that emphasize professionalism, stewardship, and service contribute to its customer loyalty.
Summary of Five Forces Analysis
A table of our findings is demonstrated below. The building sector records an increased demand for wiring and cable installation services. This is due to the need for companies, residential, and industrial building to conform to technological advancement to enhance their performance and services. There are various players in the wire and cable building industry.
There is an increased number of buyers in the market while the number of suppliers is moderate. Buyer awareness on existing prices and need for quality and affordable products increases their leverage. Also, the presence of similar substitute goods gives them more bargaining power.
The number of suppliers in the industry is moderate. This is due to similar products availability and the ease of substitution. Hence, suppliers have a medium control in the sector.
Moreover, the research shows an increased number of new entrants due to the low entry barriers, availability of training to acquire the required knowledge, and new opportunities for innovation to promote the quality of products.
The threat to product substitution occurs due to increased technological innovation to provide affordable and green-economy based products. Hence, hold high leverage in the industry.
Finally, the market is highly competitive with some firms holding a significant market share. Consequently, the competition is high in the industry.
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