What are the Porter's Five Forces of Newell Brands Inc. (NWL).

Introduction

In the business world, it’s important to understand the competition and the market in which a company operates. One tool that can be used to do this is Porter’s Five Forces analysis. This framework, developed by Harvard Business School professor Michael E. Porter, looks at five different factors that influence a company’s competitive position in a market. In this blog post, we will take a closer look at Newell Brands Inc. (NWL) and analyze how Porter’s Five Forces apply to this company. By understanding these forces, we can gain insight into not only Newell Brands’ current competitive position, but also the potential for future growth and success.

Bargaining Power of Suppliers - Porter's Five Forces of Newell Brands Inc. (NWL)

The bargaining power of suppliers is one of the key factors to understand in Porter's Five Forces analysis for any company. In the case of Newell Brands Inc, which is a leading consumer goods company, this factor also deserves attention.

Newell Brands Inc has numerous suppliers across categories such as plastics, metals, chemicals, packaging materials, and logistics services. While some of these suppliers are large corporations, many are small and medium-sized enterprises (SMEs). The bargaining power of suppliers can have a significant impact on the company's profitability and competitiveness.

• Supplier concentration - The bargaining power of suppliers is high when a few suppliers dominate the market. In such a scenario, suppliers can charge higher prices, reduce quality, or limit supply to gain a better bargaining position. However, Newell Brands Inc has a diverse supplier base, including SMEs and corporations, which reduces the supplier concentration risk.
• Switching costs - If there are few substitutes available for a specific input, suppliers can increase prices without losing customers. However, Newell Brands Inc can mitigate the impact of high switching costs by developing relationships with multiple suppliers.
• Threat of forward integration - If suppliers threaten to forward integrate into their customer's industry, the bargaining power of suppliers increases. Still, Newell Brands Inc's industry expertise and strong brand image reduce the threat of forward integration by suppliers.
• Importance of input to buyer - The bargaining power of suppliers is high if the input provided by suppliers is crucial to the buyer's operations. Newell Brands Inc may be affected by this factor, especially for critical inputs such as raw materials. However, being a large company and having a diverse supplier base can help mitigate the risk.
• Cost relative to total purchases in the industry - The bargaining power of suppliers increases when they provide a high percentage of the total cost of goods sold for the buyer. Newell Brands Inc's large size and scale may provide some advantages in negotiating fair prices for their inputs.

Overall, Newell Brands Inc has a considerable bargaining power over its suppliers due to its brand image, industry expertise, and diverse supplier base. Though some factors may pose a risk, the company has various strategies in place to mitigate those risks, ensuring long-term profitability and competitiveness.

The Bargaining Power of Customers

The bargaining power of customers refers to the level of control customers have over the prices and quality of products they purchase from a company, like Newell Brands Inc. (NWL). Customers have bargaining power when they can easily switch to another product or supplier, or when they buy large volumes of products, giving them leverage in negotiations.

The bargaining power of customers can influence a company's profitability and market share. If customers have a strong bargaining power, they can drive down prices and demand higher quality products, reducing a company's margins. Alternatively, a company that can mitigate customer bargaining power by offering unique products, exceptional customer service, or building brand loyalty will have a more sustainable competitive advantage.

For Newell Brands, customer bargaining power varies across its diverse portfolio of brands and products. For instance, customers have a strong bargaining power in the office products segment, where competitors like Staples and Amazon have created a highly competitive market with low margins. In contrast, customers may have lower bargaining power in the baby products segment, where popular and trusted brands like Graco and Baby Jogger have higher brand loyalty and perceived quality.

To improve Newell Brands' bargaining power with customers, the company can invest in branding and marketing efforts, build strong relationships with suppliers and retail customers, and offer unique products that differentiate themselves from competitors. By successfully mitigating customer bargaining power, Newell Brands can achieve cost and pricing efficiencies, increase profit margins, and promote sustainable competitive advantages.

• Customer bargaining power refers to the level of control customers have over the prices and quality of products they purchase from a company.
• If customers have strong bargaining power, they can drive down prices and demand higher quality products, reducing a company's margins.
• Newell Brands' customer bargaining power varies across its diverse portfolio of brands and products.
• Newell Brands can improve its bargaining power with customers by investing in branding and marketing efforts, building strong relationships with suppliers and retail customers, and offering unique products.

The Competitive Rivalry

The competitive rivalry is one of the Porter's Five Forces that assesses the intensity of competition in the industry. It measures the level of competition among existing players, their market share, and their ability to influence prices and offer innovative products to attract customers. In the case of Newell Brands Inc. (NWL), the company faces intense competition from various global and local players.

• Global Players: Newell Brands competes with global players such as Procter & Gamble, Kimberly-Clark, and Unilever in the consumer goods industry. These companies have a strong customer base, powerful brands, and economies of scale, which enables them to offer products at lower prices and invest in innovation and marketing.
• Local Players: Newell Brands competes with local players in different regions, offering similar products at a reduced price. These players have a better understanding of local customers and can cater to their specific needs.
• New Entrants: The consumer goods industry has a low barrier to entry, allowing new players to enter the market quickly. New entrants can leverage technology, innovation, and online platforms to offer products at lower prices and reach a wider audience. This creates intense competition for established players like Newell Brands.
• Substitute Products: The consumer goods industry has various substitute products, which can replace the existing product. For instance, customers can use reusable cloth bags instead of plastic bags. Competitors can leverage this to offer substitute products, which can displace the existing product.
• Suppliers: The consumer goods industry has various suppliers, providing raw materials and components needed to make the final product. The bargaining power of suppliers can impact the cost and quality of the final product. Suppliers can also switch to other players offering better deals, creating intense competition.

Given the intense competition in the consumer goods industry, Newell Brands must embrace innovation, customer-centricity, and speed to market. The company needs to invest in research and development to offer differentiated products, build strong relationships with suppliers, and leverage technology and data to enhance customer experience. Moreover, Newell Brands must develop strategic alliances with local players to penetrate the market and reduce competition among established players.

The Threat of Substitution: One of Porter's Five Forces for Newell Brands Inc. (NWL)

The threat of substitution is one of the five forces defined by Michael Porter that can shape the competitive landscape of a company. This force assesses the likelihood of customers switching to alternative products or services that can serve the same purpose as the company's offerings but are from different industries or categories. In the case of Newell Brands Inc., which focuses on consumer goods, substitution can represent a significant challenge, as customers have more choices than ever before.

Newell Brands Inc. competes in various industries and product categories. For example, its portfolio includes household consumer goods, office products, sporting goods, baby products, and food storage items, among others. However, each of these categories faces the threat of substitution from alternative products or services. For instance, customers who buy food containers from Newell Brands can opt for glass, silicone, or stainless-steel alternatives from competitors or other industries, such as kitchenware or home decor. Similarly, customers who buy Graco-branded strollers can choose from other stroller brands, but also from alternatives like baby carriers, car seats, or even DIY carriage projects.

The degree of the threat of substitution depends on several factors, including but not limited to:

• The availability of substitutes in the market - if many substitutes are available, the threat is higher;
• The similarity and quality of substitutes - if substitutes are similar and/or of the same or better quality, the threat is higher;
• The switching costs for customers - if switching costs (such as financial, psychological, or practical costs) are low, the threat is higher;
• The brand loyalty and switching barriers - if customers are loyal to the company and its brand, or if there are high switching barriers (such as regulatory, network effects, or emotional factors), the threat is lower.

Newell Brands Inc. can address the threat of substitution by taking various strategic actions, such as:

• Focusing on innovation and differentiation - by creating unique and useful products that stand out from competitors and substitutes;
• Building and nurturing brand loyalty - by investing in marketing and customer experience initiatives that foster emotional connections and repeat purchases;
• Establishing partnerships and collaborations - by joining forces with other companies, industries, or organizations to offer bundled solutions or cross-promotions;
• Diversifying and expanding the business - by entering new markets or product categories that are less susceptible to substitution or can complement the existing ones;
• Monitoring and adapting to market trends - by keeping an eye on the competition and the changing customer needs and preferences, and adjusting the product offerings and strategies accordingly.

Overall, the threat of substitution is a crucial factor that Newell Brands Inc. needs to consider when assessing its competitiveness and growth potential. By understanding the drivers of the threat and taking proactive measures to mitigate it, the company can strengthen its market position and sustain its success.

The Threat of New Entrants

One of the important factors that affect the potential success of a company like Newell Brands Inc. (NWL) is the threat of new entrants in the market. In the market, new entrants can disrupt the existing market share of established players such as NWL.

The threat of new entrants is high when the barriers to entry are low. These barriers can range from obtaining licenses, permits, and certifications, to having high capital requirements, and a complex supply chain. With the barriers low, new entrants can easily enter the market and compete with the existing players, and as a result, the competition increases.

Moreover, new entrants may have innovative products, higher quality, lower prices, better distribution channels, and customer experience. As customers always prefer the best products and services in the market, the new entrants can attract the existing customers of established players. This can result in market share loss, lower profits, and may even lead to exiting the market altogether.

However, NWL has established itself as one of the leading brands in the market. It has a wide range of products, diversified customer base, and established brand name. This has resulted in the company having a strong customer base that prefers its products over the new entrants.

• NWL has established strong relationships with its suppliers, distributors, and retailers, which makes it difficult for new entrants to compete with it.
• The company has a large distribution network, which makes it difficult for new entrants to replicate.
• NWL has a strong research and development team that is continuously working on developing innovative products, which gives it an edge over the new entrants.
• NWL has a strong brand name, which customers trust, and this gives it a competitive advantage over the new entrants.

Overall, while the threat of new entrants cannot be discounted completely, due to the established brand name, diversified customer base, and strong research and development team of NWL, it puts it in a strong position to tackle the competition from new entrants.

Conclusion:

In conclusion, the Porter's Five Forces framework is a valuable tool for analyzing the competitive landscape of companies such as Newell Brands Inc. (NWL). By assessing the bargaining power of suppliers and buyers, the threat of new entrants and substitutes, as well as the intensity of rivalry among existing competitors, we can gain a deeper understanding of the overall industry dynamics and strategically position the company for success. With the information gathered from this analysis, Newell Brands Inc. (NWL) can make informed decisions on how to allocate resources, create sustainable competitive advantages, and ultimately achieve its long-term goals. While this framework is not a one-size-fits-all solution, it provides a solid foundation for conducting a thorough industry analysis and identifying key factors that can impact the success of a company. Overall, understanding the Porter's Five Forces can help Newell Brands Inc. (NWL) remain competitive and navigate the ever-changing business landscape. By continuously evaluating and adapting its strategy, the company can stay ahead of the curve and thrive in a dynamic marketplace.