Michael Porter’s Five Forces Essay

XanGo LLC of Lehi, Utah and makers of XanGo, the health beverage from mangoosteen, is now on the fast track to success. According to the Nutritional Business Journal in its issue of October 6, 2006 the company is now ranked fourth in domestic volume sales among network marketing companies in the United States in just about 3 years. It has competitive edge based on Michael Porter’s Five Forces of Competition, while information technology has enhanced this advantage, which translated to profits for the company.

Industry Rivalry. Other health drinks and nutritional supplements are not giving XanGo a fierce competition that would create a price war and little market share for all. The fact that XanGo has taken the lead in a relatively short time means that it is way ahead in the league. Threat of Substitute Products. XanGo enjoys customer loyalty with its 600% consumer retention. This means no product of the competition comes quite close. Its single product is endorsed by medical professionals and practitioners and manufactured under the supervision of 150 researchers and scientists.

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Threat of New Entrants. Presently there appears to be no such threat. Old players have not been aggressive enough to keep up with XanGo. It might take sometime yet before new entrants can create a niche for themselves in the competition. Bargaining Power of Buyers. XanGo had been meeting its projected sales targets because the ratio of supplier to the market is in its favor. Buyers have a low bargaining power and XanGo can set the controls in pricing. Bargaining Power of Suppliers.

In the case of XanGo, its raw material (mangoosteen) can never be substituted and XanGo has no other need from supplier except mangoosteen. In this case, the supplier of mangoosteen has a low bargaining power. In all the above Porter’s Five Forces of Competition, XanGo has the edge over competition. Information Technology has enhanced this advantage through its state-of-the art website. It is accessible to anyone interested to know about XanGo. The company is able to inform the public of value of the product, what it is and what benefits it gives.

The website also publishes the background of the company, what it is and what it does. The distribution network uses the website to transact business with the company and the marketing level they belong to. Online technology provides the convenience of marketing, selling and purchasing of the product. This is one case where a high-performance company is benefiting from transparency. Transparency provides it with the convenience of conducting its business faster and at the same time makes the profits.

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