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Analyzing Porter's Five Forces for Cement Industry

The document analyzes Porter's Five Forces model for Lucky Cement Ltd. The threat of new entrants is medium as cement production technology is available but there are high fixed costs. The threat of supplier and buyer power is low as raw materials are available locally and cement prices are similar. The threat of substitutes is low as building blocks only slightly diminish cement demand. The threat of rivalry among firms is high as competition is stiff with similar products despite Lucky Cement's advantages.

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Samrah
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294 views1 page

Analyzing Porter's Five Forces for Cement Industry

The document analyzes Porter's Five Forces model for Lucky Cement Ltd. The threat of new entrants is medium as cement production technology is available but there are high fixed costs. The threat of supplier and buyer power is low as raw materials are available locally and cement prices are similar. The threat of substitutes is low as building blocks only slightly diminish cement demand. The threat of rivalry among firms is high as competition is stiff with similar products despite Lucky Cement's advantages.

Uploaded by

Samrah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

PORTER’S FIVE FORCES MODEL

Threat of New Entrants


The ease of entry for novice players include: the technology used for cement production is easily available and
the raw material used for cement production is also easily available. But the entry barriers consist of: high fixed
cost, requirement of large investment, high cost of electricity and power, and achievement of economies of
scale. Hence, the intensity of this threat is at medium level i.e. not posing a threat for Lucky Cement Ltd.

Threat of Supplier Power


The raw materials are easily available from local vendors. The electricity power supplier to the industry is
increasing its prices on the command of government, and this is affecting every sector, but Lucky Cement Ltd.
is lucky to have its own energy generation system too. Hence, the intensity of this threat is low.

Threat of Buyer Power


The price of the cement given by all the companies is almost the same in Pakistan. So, the buyer has no other
option if s/he is in need of it, which means switching cost of buyer is low. Hence, the intensity of this threat is
low.

Threat of Substitutes
There is no proper substitute available in the market for cement products, except the building blocks and pre-
fabricated walls and ceilings. Indeed, abruptly the building blocks (used instead of bricks) industry seems
booming as blocks (which use some cement as well) have been used in construction, which have slightly
diminished the demand of cement while construction. In the same way, pre-fabricated walls and ceilings also
play the same effect. But such decrease in demand is not noticed yet, since the overall demand of cement for
construction industry domestically and internationally seems rising. Hence, the intensity of this threat is low.

Threat of Rivalry among Firms


The competition in the industry is very stiff, as there is almost no differentiation in products. The production
capacity of all the players is high. The top players inclusive of LCL has the cutting edge technology, production
capacity, alternate energy generation, huge financial backing, own transportation, wide distribution network,
and relationships with customers and dealers based on services. Even then, the intensity of this threat is high.

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