Porter's Five Forces model of LUX (Unilever)

Lux is a very popular brand in soap category of Unilever. Unilever earns a large share of revenue by selling Lux. Here we are going to discuss Porter’s Five Forces in connection with LUX soap:

1.       Degree of rivalry (HIGH): The brand LUX has got huge market share especially in India and Bangladesh. If we focus on the other brands in soap category in India, we can see that there are lots of strong brands present in the market. Vivel soap, Cinthol and Pears lead to the decline in their profit level. And that is how it’s competition level becomes even tougher. However, LUX is constantly fighting to retain it’s market share and to increase it’s market growth rate in India.

Now let’s take a look at the perspective of LUX in Bangladeshi market. We can also see competition for LUX in Bangladeshi market as here are lots of other soap brands like Keya, Kohinoor, Dettol etc available in the market. Needless to say that LUX is the market leader in Bangladesh, however Dettol and other competitors lead to a little bit decline in LUX’s profit level. But still in my opinion, degree of rivalry between LUX and other brands in Bangladesh is pretty much low. However, LUX is earning revenue and doing business in a lot of countries around the world. So if we generalize it from every aspect, LUX’s degree of rivalry is really high.

2.      Bargaining power of buyers (HIGH): Consumers always want to buy quality products at a cheaper rate. Since the price level of LUX is a bit high, some consumers do not feel interested in buying LUX as other brands also offer good quality product in soap category at a cheaper rate. So buyers have high bargaining power which somehow causes Unilever to lose some market share.

3.      Bargaining power of suppliers (LOW): There are plenty of suppliers in the market to supply raw materials to soap producing companies and they compete among each other. As a result of which LUX enjoys the facility to get suppliers providing good quality raw materials at a cheaper rate. So the lucid analysis of the situation says that bargaining power of suppliers is very low.

4.      Threat of substitutes (HIGH): There are direct and indirect substitutes for LUX available in the market. Among them Facewash and Bodywash are two major threats for LUX as substitutes. As people are getting more conscious of their skin and health, they are focusing on most appropriate things that they should be using and this is posing LUX a huge threat in terms of revenue and also compromising it’s market share. Another threat is the adoption of soaps from other brands due to premium price that LUX charges on it’s consumers.

5.      Threat of new entrants (HIGH): The main raw material to produce soap is palm oil which is relatively high in price in India. However palm oil is way cheaper in China and Malaysia. So there is always a chance for a new company to get raw materials at a cheaper rate and serving a specific market segment profitably offering their products in soap category at lower prices while causing decline to LUX’s market share. So it creates vulnerability for LUX to the threats of new entrants.

References:

1. Slideshare.net, (2014). Lux report. [online] Available at: http://www.slideshare.net/HarshPatel14/lux-report [Accessed 5 Nov. 2014].

2. Ukessays.com, (2014). Situational and environmental analysis of Lux Soap. [online] Available at: http://www.ukessays.com/essays/marketing/situational-and-environmental-analysis-of-lux-soap-marketing-essay.php#ixzz3I79GjVeY [Accessed 5 Nov. 2014].

3. Unilever.com.bd, (2014). Lux | Our brands | Bangladesh. [online] Available at: http://www.unilever.com.bd/our-brands/detail/Lux/365830/ [Accessed 5 Nov. 2014].

4. Wikipedia, (2014). Lux (soap). [online] Available at: http://en.wikipedia.org/wiki/Lux_(soap) [Accessed 5 Nov. 2014].