E-Coat Competitive Advantages/Future Success
competitive rivalry looks at the number and strength of my competitors. Due to the uniqueness of my product, I do believe that my competitive rivalry is minimal. Therefore, I will have the power to set my own prices, without the possibility of being undercut.
Ultimately, the consumers determine if I have an intense rivalry or a minimal rivalry. If they categorize my insulation with other insulation companies, then my company will have some competitive issues.
If I were lumped in with the rest of the insulation market, I would be competing with roughly ten other Metro-Detroit companies. This intense rivalry would not be good for my business because they would be able to undercut my price. Our compostable materials drive up the manufacturing costs of the product, making it virtually impossible to compete, price wise.
I will supply most of my goods, in house, minimizing the amount that I will need to pay outside suppliers. Even so, I will have to pay for recycled plastics and recycled denim. There are many recycling plants, and denim producers that I can purchase supplies from, making it easy to switch to a cheaper supplier, at any time.
Overall, I do not believe recycling plants or denim producers have much leverage in negotiating price. Denim suppliers throw out their denim scraps, for zero profit, so it is safe to assume that they would offer me a fair price. Likewise, recycling plants make very minimal gains on the recycled plastics that they bring in. In most cases, the government has to contribute to keep recycling plants afloat.
I plan on fulfilling a large number of buyer needs. Since I will have a large number of buyers, it will not be easy for them to drive down the price of the product. Overall, I believe that I will have the power over pricing because the buyers will need my product, due to the fact that my insulation is one of a kind.
However, there is a possible threat of substitution. For example, if a copycat company was able to produce a similar product to mine, they could sell it at a lower price by outsource their product. If this copycat company were to outsource, they could manufacture the product with decreased wages, dropping their manufacturing costs. This would allow them to undercut my business, while producing a very similar product.
However, shipping the product, overseas may be costly, ultimately negating their savings on labor. This is a risk that my rivals may have to take, but should be watched closely by my company.
As far as threat of Entry, the startup costs on machinery is expensive, making a difficult barrier on market entry. However, if a company does have the funds to purchase the expensive machinery that it takes to harvest and produce cellulose fibers that would make it a relatively easy market to enter.
As of right now, I do not have any protection over my key technologies, but if I were to forgo a patent on my insulation material, that would make it very difficult for new entry, or copycat outsourcing to occur.
