Porter's+five+Forces

=Porter’s Five Forces= Porter’s five competitive forces is a useful analysis tool in approach to the appraisal of competitive forces in an industry to help define the most suitable and appropriate business strategy //(Edwards, Ward, Bytheway, 1995)//.Figure 16 shows each of the competitive forces as well as how they play a major role in shaping an industry.

**Bargaining Power of Suppliers**
//This force is considered low // because supplier products have substitutes like vehicles. Currently, Hermes uses small-vans and light-goods vehicles for shipment transportation. If these classes of vehicle suppliers fail to meet Hermes’s requirement, Hermes can switch to small-lorries which also serves the same purpose. Besides that, supplier products also have no differentiation like packaging boxes. Hermes has a wide-range of options to purchase from, making them easier to bargain for lower prices.

**Bargaining Power of Buyers**
//This force is considered high // because 51% of business comes from contract customers, which are likely to be medium - large sized companies with large document shipments. This means that Hermes’s must try to meet their requirements (cost etc). Continuing, large companies can also opt to transport documents themselves making Hermes’s market share smaller. Therefore, Hermes must form a good relationship with their customers and fulfill their every requirements as much as possible.

Threat Of Substitute Products And Services
Since Hermes operates within regions of UK only, their method of transportation is by light vehicles for within region and Lorries for between regions while outsourcing to subcontractors for outside main regions. At a glance, //this force may not be relatively high but still poses some threat // because of several not-so-good substitutes available thus affecting Hermes’s business. For example, companies with the resources can ship within and between regions personally. Besides that, traditionally sending of documents in hardcopy due to signature acknowledgment has been overcome via email today which offer signature recognition where each outgoing mail is attach with the senders signature.

Threat Of New Entrants
Since UK has an open economy system (Murray & Spens, 2006), foreign companies can freely set-up companies leading the courier industry to mature considerably (competitors like FedEx, UPS etc). Therefore, tedious and complex regulations are needed to regulate setting up new companies which helps in protecting Hermes. Setting-up a new courier business also requires huge capital (e.g. vehicles, buildings etc) making cost of exit high due to disposable investment. Hence, companies will require careful planning and analysis before entering. Currently Hermes has 51% of customers bounded by contract, meaning switching cost is significantly high (contract penalties). Therefore, customers have to use Hermes until their contract expires. Conclusion, //this force ought to be considered low. //

//This force is considered high // because there are many other competitors (FedEx, ParcelForce, Royal Mail etc) besides Hermes in UK //(Lewis, 2009)//. This means Hermes’s market share will reduce. In conjunction, differentiation or switching cost is also low. Therefore, customers can have options for document shipment.

=Reference= Edwards, C., Ward, J and Bytheway, A, 1995, //The Essence Of Information Systems//, 2nd Edition, Maylands Avenue, Prentice Hill. Murray, M and Spens, //A Guide To Doing Business In// UK, available from [|www.lexmundi.com/images/lexmundi/PDF/guide_uk.pdf], [accessed on 17th June 2009] Lewis, J, Courier Companies In The UK, available from [], [accessed on 18th June 2009]