PORTER’S FIVE FORCES MODEL

Porter has identified five competitive forces that shape every industry and every market. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry

Bargaining power of Supplier:

There is a low bargaining power in the advertising industry of Pakistan because of the following reasons. 1.Increase in the number of content providers , As there are a number of advertising agencies present in the market and providing the same service to the customers in order to increase their clientele so the suppliers cannot raise their prices according to their own will.

2. The switching cost from one supplier to another supplier is not very high.

Bargaining power to the Customers:

There is a high bargaining power of customers in the advertising industry of Pakistan because of the following reasons:

1. Availability of the variety of alternative sources for the advertising and promotion purpose of their organizations and brands.

2. Switching to an alternative product is relatively simple and is not related to high costs3. The customer knows about the production costs of the product

Threat of New Entrants

There is a low threat of new entrants in the Pakistan’s Advertising industry because of following reasons:

1. Less number of customers available in the market because of the financial and economical crisis in Pakistan.

2. Requirement of high and risky investment.3. Loyalty of the customers with their existing service providers.

Threats of Substitute:

The threat of substitute is high in the Pakistan’s Advertising industry as there are a number of competitors present in the industry having a goodwill and expertise. The names of the major market leaders besides Interflow Communications of Advertising Industry of Pakistan are as follows:1.JWT Asiatic2.LNR3.Pak Ad Com4.Midas5.Orient Mccan6.ONM7.Synergy

Industry Competition:

There is a high competition in the Pakistan’s Advertising industry because of the following reasons:1. Highly perishable products.2. Highly fragmented Industry.3. Low market growth rate.4. Expertise and creativity requirements.

SWOT ANALYSIS

Based on the above analysis of porter’s diamond model, we can conclude the following strengths and weaknesses of Interflow Communications Private Limited.

Strength:

Interflow Communications is not only an advertising agency, it is a group of company having many extensions so it has a strong financial state.

Interflow Communications has an International affiliation with the renowned advertising organization OLM.

Interflow Communications is among the top five advertising agencies of Pakistan having almost 33% of market share.

Inter flow Communications has well trained and highly morale staff. Inter flow has diversified market position. Inter flow have a vast sales channels.

Products as well as services advertising are done here simultaneously. Company is meeting up the client requirements in time. Innovative & creative in advertisement segment. Company has Quality in advertisement. Global exposure with higher rewards & appreciation. Efficient team working environment. product and service diversification and a sustainable business model. According to the Gallop survey of Pakistan, the TOP 10 Companies advertised on TV

made up more than 56% of total advertising share in 2010. UNILEVER maintains its TOP position, followed by PTCL, China Mobile, Telenor and P&G. Among these advertisers PTCL and its subsidiary Ufone are the clients of Interflow Communication and enhance its market share efficiently.

Rank(FY-2009-2010) Company %share

1

UniLever Pakistan Ltd. 15.17

2

Pakistan

Telecommunication

company Ltd

7.36

3

China Mobile 6.44

4

Telenor Pakistan Pvt Ltd 6.33

5

Procter & Gamble Pakistan 5.13

6

Pakistan Mobile

Communications(PVT)Ltd

4.11

7

Nestle Pakistan Ltd 3.70

8

Engro Food(Pvt)Ltd 2.85

9 Colgate Palmolive Pakistan

Ltd

2.52

10Pepsi Cola International 2.48

Weakness

Interflow Communications has small number of Leading Advertisers in Pakistan. These clients constitute 80% of their sales (20-80 principle), if these clients are lost then Interflow will suffer from a heavy loss and will lose its market position. .

Lack of new product and services entry. Interflow communications now a day’s having vertical growth having no diversified portfolio with only key accounts.

Profit margin is big challenge now days. Expert employees are quite costly.

Opportunities

Because of the economic crisis in Pakistan, the companies are focusing more on the advertising and promotions of their brands in order to enhance brand recall and recognition which ultimately increase their sales.

Entering in global market to attract global client Advertising business is now converted into an industry. New complimentary markets are there for business projection. Total Advertising Spend in Pakistan is estimated at 30 Billion Rupees; increases by 12%

over the previous year. The largest increase was seen in TV (17%). Interestingly Print Ad Spend increased the least (4% only).

Telecommunication Sector and food sector have increased its budget for TV advertising with a considerable amount in last few years.

After the death of the owner of Orient Advertising Agency S.H Hashmi and division of this agency, it loses its goodwill and number of clients, which can be grasp by efficient service.

Social Marketing Sector is developing attracting funds in the country.

Ten Year Reflective Study on TV Advertising9 Skin Care Rank(2009) Top Ten Sector of

AdvertisingRank(2001)

1 Telecomunication 162 Foods 13 Drinks 24 House Hold Cleaning

Materials8

5 Hair Care 66 Soaps 97 Confectionary 38 Real state 199 Skin Care 1210 Hoese Holds/office goods 5

Threats

The economic downturn faced by the country in last 2-3 years results in the worst economical and financial condition.

Dissolution of HEC and Ministries in Islamabad which constitute a major portion of the sales of Advertising Agencies.

Challenging stiff competition from its competitor’s from both domestic & international levels.

The presence of OLM as a separate advertising agency and a competitor of Interflow Communications.

The high growth rate of Midas and M Com. Changes in the taste & preferences of clients. Client’s economical position also effects .In the present situation advertising expenditure

is only increasing due to spend of few big clients. New competitors are in market as there are almost 40-45 new advertising agencies which

are also in competition.