Porter's Five Forces: A Case Study Of Grainger

To better understand how Grainger will live its mission and plan to achieve the future vision, we will take a look at the external environment that the company faces. Important factors to consider for Grainger are the company’s threats and opportunities.
Weakness in the economy can have a negative impact on any organization. Grainger receives financial support from customers globally. (Grainger, About Us, 2015) If the customers are being impacted negatively from the economy, Grainger’s sales growth would be affected. An example is if one of Grainger’s main customers closed a facility. The company would feel the negative impact as a result.
Grainger competes in a highly competitive environment. According to Morningstar, the company competes
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The model uses five categories to identify where the power lies. The five categories or “forces” as Porter explains are the threats of new entrants, the threat of substitute products, the bargaining power of customers, the bargaining power of suppliers, and the intensity of competitive rivalry. (Mindtools, Porter’s Five Forces, Author: Manketlow, 2015)
 The threat of new entrants
Grainger’s highly competitive industry would make it tough for a new entrant to be successful. A company could join the industry but competition would be fierce. The threat of new companies coming to the market and succeeding is low.
 The threat of Substitute products
The threat of substitute products is high. Suppliers could easily go down the street and purchase the product from the competitor for relatively the same price. Because Grainger is a large distributor there is a threat that the customer would use a smaller supplier to purchase the same
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The company hires highly talented dedicated employees to serve the customers. With a focus on its employees the company creates an atmosphere where employees thrive. Grainger uses its employees to establish its competitive advantage.
Below is an analysis of Grainger’s opportunities and threats from Global Data’s SWOT Analysis. Understanding how the company will exploit the opportunities and reduce the threats will set the stage for a strategy implementation process.
Opportunities
 Business Expansion Initiatives – The Company is looking to expand in the North Eastern part of the country. The creation of a distribution center will enable the company to create a presence in the New England area.
 Strategic Acquisition – The Company has purchased companies that ties them to the manufacturing sector. The purchase of Safety Solutions, Inc. has started this venture.
 Demand for power tools – As the economy has strengthened the last couple of years, construction is on the rise. When completing construction power tools are in demand.
 Service focused business opportunities – With Grainger’s focus on highly talented employees using their service focus to expand their

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