Porters Buyers Force Between Georgia Pacific and Kimberly Clarke

Porters Buyers Force Between Georgia Pacific and Kimberly Clarke

Buyers

Both Georgia Pacific and Kimberly Clarke target consumers in the paper industry. However, Georgia Pacific operates in the pulp and paper industry while Kimberly Clarke operates in the personal care industry. The companies offer products that are almost similar. However, they also produce unrelated products (Smith, 2010). All in all, they are major competitors. Kimberly-Clark produces paper based products including facial tissue, disposable diapers, scientific cleaning wipers, toilet paper, ascot, Cottonelle, Kotex feminine hygiene products, and Kleenex facial tissue among others. On the other hand, Georgia-Pacific produces building products, towel dispensers, toilet paper, pulp, and tissue among others (Pride, Hughes, & Kapoor, 2010).

The products are sold to target to target customers including supermarkets among other retailers. Many consumers in the market consume products and services provided by both Georgia Pacific and Kimberly Clarke. With this being the case, the companies enjoy some level of power over the consumers. Specifically, consumers cannot survive without the products offered by the companies (Heinrich & Batchelor, 2014). However, the competition among different companies gives consumers some power over their vendors. Essentially, there are many companies offering the products and services produced by Georgia Pacific and Kimberly Clark. As such, the companies must offer the best or quality products to attract and retain the highest number of customers. The industry is attractive. Nevertheless, it is imperative for companies to offer the best products failure to which they stand to lose their loyal customers to the competition (Elias & Stim, 2013).

 Buyer Concentration

            It is evident that there are many companies offering products and services rendered by Georgia Pacific and Kimberly Clarke. With this being the case, customers enjoy bargaining power over them. However, the number of consumers is also considerably high. As such, the companies are able to attract and retain many customers. All the need to do is ensure the development of great competitive strategies (Smith, 2010). The law of the jungle applies in this case. Georgia Pacific finds it easy to attract customers as compared to Kimberly Clarke. This can be attributed to its ability to offer quality products and services. As such, customers are attracted to its products as opposed to those offered by the competition. Georgia Pacific has been able to enter many international markets, hence higher buyer concentration. This has also given it more power over its buyers (Brown, Bessant, & Lamming, 2013).

Kimberly Clarke has also been trying it levels best to attract and maintain the highest number of customers. However, it has a low bargaining power over its competitors such as Georgia Pacific. It has over the years attempted to fill the gap. Nevertheless, it is yet to achieve a high bargaining power over consumers (Wheelen & Hunger, 2015). This implies that it shares consumers with competitors. Buyer concentration has been increasing over the last few years. This is a clear indication that the companies are likely to access more customers in the near future. This is a trend that is expected to continue for many years to come. Companies such as Kimberly Clarke must improve on the quality of its products to enhance their competitiveness. Kimberly Clarke has also focused more on the U.S. market. This is unlike the case with Georgia Pacific that has entered many markets across the globe. Basically, Kimberly has a limited market. As such, its buyer concentration is low. This is also one of the major reasons that have led to the company having low to moderate power over its competitors (Elias & Stim, 2013).

Buyer Switching Costs

Switching costs are considerably low. Basically, consumers incur low costs when changing from over vendor to another in the industry. This is one of the major reasons that have led to consumers having more power over companies such as Georgia Pacific and Kimberly Clarke. For instance, a customer does not require new skills and knowledge to consume products and services produced by a different vendor. This can be attributed to the fact that the companies offer products that are almost similar. Specifically, a customer applies the same skills when consuming products offered by Georgia Pacific. The same knowledge is applied when dealing with products offered by Kimberly Clarke. (Smith, 2010)

Nonetheless, consumers normally incur a cost when moving from Georgia Pacific products to other products. In particular, products offered by Georgia Pacific are of high quality as compared to those offered by Kimberly Clarke. As such, a customer has to incur the cost of foregoing high quality products in favor of low quality products. Kimberly Clarke has also been attempting to fill the gap in terms of quality. However, it is yet to achieve high levels of bargaining power over its competitors (Heinrich & Batchelor, 2014).

Buyer Information

            As mentioned above, both Georgia and Kimberly Clarke target almost the same consumers in the market. The companies are also operating in different industries. Specifically, Georgia Pacific operates in the pulp and paper industry while Kimberly Clarke operates in the personal care industry. Consumers have been able to enhance their knowledge and skills in the personal care industry (Heinrich & Batchelor, 2014). In particularly, they seek ways through which they can enhance their beauty. In the process, they are also able to access wide knowledge in the industry. This is a clear indication that customers in the industry are highly knowledge. For instance, they know exactly what they want. This also implies that companies such as Kimberly Clarke cannot manipulate them into purchasing what they do not want. Equally, consumers enjoy more power over their vendors. It is upon the vendors to ensure they offer the best failure to which they stand to lose their target customers to the competition (Elias & Stim, 2013).

In the same regard, consumers also have information in regards to the products and services rendered in the pulp and paper industry. Essentially, they understand the type of products offered in the industry and the benefits that accrue from consuming the products (Brown, Bessant, & Lamming, 2013). Similarly, they know which companies offer the best or high quality products as well as those that offer low quality products. This also means that companies such as Georgia Pacific cannot manipulate them into purchasing what they do not want. Companies have to provide products that are of high quality to attract the highest number of customers.         Buyer information has also given companies power over their vendors. Research has shown that companies have the tendency to exploit customers whenever they lack information in relation to what is being offering in the market or industry. They are able to pull-off this strategy as consumers lack information on what is being sold and the benefits associated with them (Smith, 2010).

Threat of Backward Integration

            Both Georgia Pacific and Kimberly Clarke have employed backward integration. Essentially, they are purchasing or acquiring some of their suppliers with an aim of improving their efficiency as well as ability to serve their target customers. It is evident that the strategy has enabled them to cut transportation costs and costs of acquiring their materials. As a result, they are able to improve their profitability. They are also able to use the savings in cutting the costs of their products. Kimberly Clarke has over the years dealt with the issue of backward integration. Specifically, its target consumers have been attracted to products and services provided by the competition. Essentially, they have been changing their suppliers whenever they feel dissatisfied with then products offered by their current suppliers. However, the company has been trying its level best to ensure this does not affect its profitability (Heinrich & Batchelor, 2014).

Georgia is also exposed to the threat of backward integration. However, the company performs better in terms of retaining its loyal customers to losing them to the competition. This is evident considering the fact that it provides high quality products and services. The company has also committed itself to continuous improvement. With this being the case, its customers find it the best supplier. This has also enabled it to be ranked among the world’s leading producers of paper, tissue, and pulp (Smith, 2010).

Pull Through

Georgia Pacific and Kimberly Clarke have been able to deal with the pull through strategy with ease. Essentially, the companies find it easy to market their products and services. They are able to sell their products to wholesalers as well as retailers. Most of their products can be accessed in supermarkets. The company is able to market its products through the application of different strategies including internet marketing, word of mouth, and print marketing among others. This is done to ensure that it intermediaries are aware of its products. In the same regard, it is able to spread the word among its customers. Fundamentally, companies in the industry do not have to struggle to attract customers (Smith, 2010). This gives them more power over its customers. In the same regard, this has attracted many startups in the industry despite the fact that capital required to start a business in it is considerably high. This is also one of the reasons that have led to companies having some power over their competitors. Some of the products offered in the industry are consumed by customers on a daily basis (Wheelen & Hunger, 2015).

Brand Identity of Buyers

            Georgia Pacific and Kimberly Clarke have also ensured brand identity of its buyers. This has also given their respective industries power over their powers. Kimberly Clarke offers a number of products that consumers are able to identify with especially those targeted at high income earners. Basically, there are some of its products that are considered to be of high quality. As such, customers may find it hard to access the same elsewhere. This is also a similar trend with Georgia Pacific (Smith, 2010). Customers are also able to identify with some of its products. However, the two companies also offer products targeted to low income earners. Such products are less differentiated. This can be attributed to the fact that there might be other companies that offer the same. There are times when the companies can compromise on the quality of products and services rendered to customers. This may be intentional or unintentional. For instance, the companies may offer low quality products to cut on their expenses (Heinrich & Batchelor, 2014).

Price Sensitivity         

            Consumers in the industry are also sensitive to the prices of products offered by companies in the industry. Specifically, companies must ensure that they price their products competitively failure to which they stand to lose them to the competition. Price sensitivity has resulted from high competition. Essentially, there are companies that offer products that are priced low. This has been a major problem or challenge to Kimberly Clarke. However, the company has ensured the production of high products and services that meet the needs and wants of their customers. All in all, customers enjoy a bargaining power in terms of influencing the prices of products rendered to them. This is a factor Kimberly has to consider at all times to avoid losing loyal customers (Heinrich & Batchelor, 2014).

Georgia has also faced the issue of price sensitivity. Nevertheless, the company ensures its products are of high quality as compared to those offered by the competition. Specifically, it offers its customers what the competition cannot. As a result, customers may incur a cost when switching suppliers. Essentially, they find it hard to find the satisfaction derived from products offered by Georgia elsewhere. This is also one of the major reasons that have enabled the company to offer highly priced products. Basically, it offers expensive products as compared to those provided by the competition. Nevertheless, it is still able to attract and retain a high number of customers (Smith, 2010).

Price to Total Purchases

            The products purchased in the industry are important to consumers. However, consumers are able to survive without them. In particular, some of the products cannot be categorized under the basic necessities consumed by customers (Brown, Bessant, & Lamming, 2013). Essentially, the purchases in the industry only make a small percentage of the products consumed by consumers or consumers on a monthly basis. This is a clear indication that consumers have more power over companies such as Kimberly and Georgia Pacific. However, the percentage of products consumed by Kimberly Clarke is considerably high as compared to Georgia Pacific. This gives it more power over its consumer. Nonetheless, consumers still enjoy high power over both companies in regards to total purchases (Smith, 2010).

Conclusion

            It is evident that both companies target almost similar customers. As such, they must provide high quality products and services failure to which they stand to lose them to the competition. The companies are able to access many customers in the market. This gives them some power over customers. However, consumers are able to switch suppliers whenever they feel dissatisfied with products offered by their current supplier. Customers have information in relation to the products offered in the industry and the benefits associated with the same. This is also one of the factors that have led to the threat of backward integration. However, the two companies have a bargaining power in terms of pull through. Many customers are price sensitive. The two companies must price their products competitively to attract many customers. This must also be the case considering the fact that the percentage of goods purchased in the industries is considerably low.

Overall Conclusion about the Paper industry

            The paper industry is attractive. However, there are number of threats companies may be exposed to. For instance, competition and high customer power are challenges companies operating in the industry have to deal with on a daily basis. Increasing labor costs are also a threat to companies such as Kimberly Clarke and Georgia Pacific. However, companies are also exposed to numerous opportunities such as increasing demand for paper products. Companies in the industry can also expand to other markets especially in the global arena (Wheelen & Hunger, 2015).

Critical Success Factors

            There are a number of critical success factors companies in the industry must embrace to ensure their continued survival. For one, it is imperative for them to invest more and more in research and development. This will enable them to improve on the quality of products and services rendered to consumers. In the same regard, companies in the industry must also ensure high levels of customer satisfaction. Customer satisfaction leads to increased customer loyalty. As a result, companies will maintain high sales, hence profitability. In the same regard, companies in the industry must ensure a high understanding of consumer needs and wants. This is the only way they will be able to serve the same in the desired manner (Heinrich & Batchelor, 2014).

Prognosis

            As mentioned above, the paper industry is very viable. Basically, companies in the industry have the ability to achieve even better results in the future. Nevertheless, this can only be achieved through continuous investment in research and development. The companies must also be able to analyze the industry to ascertain any changes. It is only through this that they can adapt to the changes, hence their continued success.

References

Brown, S., Bessant, J., & Lamming, R. (2013). Strategic Operations Management. New York, NY: Routledge.

Elias, S., & Stim, R. (2013). Trademark: Legal Care for Your Business & Product Name. Berkeley, CA: Nolo.

Heinrich, T., & Batchelor, B. (2014). Kotex, Kleenex, Huggies : Kimberly-Clark and the consumer revolution in American business. Columbus : Ohio State Univ. Press.

Pride, W., Hughes, R., & Kapoor, J. (2010). Foundations of Business. Mason, OH: Cengage Learning.

Smith, M. (2010). The U.S. Paper Industry and Sustainable Production: An Argument for Restructuring. Massachusetts: Massachusetts Institute of Technology.

Wheelen, T. L., & Hunger, J. D. (2015). Strategic management and business policy : globalization, innovation, and sustainability. Boston : Pearson.