Porter’s 5-Forces Analysis:

Porter’s Five Forces Analysis of Industryi

Engro is taken from the company logo "Energy for Growth". Engro Chemical Pakistan Limited
(ECPL) is a Pakistani fertilizer manufacturing and marketing company is a primary target for an analysis
using Michael Porter’s 5-Forces Model (“5-Forces”). We have applied the 5-Forces analysis into the
respective divisions: Supplier Power, Barriers to Entry, Threat of Substitutes, Buyer Power and Degree
of Rivalry. An in-depth analysis of each force within the Engro Chemical Pakistan Limited (ECPL)

Its production is based in Daharki, Sindh and Karachi. It is included in the KSE 100 stock index at the
Karachi Stock Exchange and also listed on the Lahore and Islamabad Stock exchanges. Engro Chemical
Pakistan Limited, the Company has gone from strength to strength, reflected in its consistent and
enviable financial performance, growth of the core fertilizer business and successful business
diversification into other fields. Its performance & outlook is following the declared Vision “to be the
Premier Pakistani Enterprise with a global reach, passionately pursuing value creation for all stake
holders.”

Supplier Power
Supplier Power is analyzed though supplier concentration, importance of volume to supplier,
differentiation of inputs, switching costs of firms in the industry, etcetera. Suppliers are powerful if there
are only a few suppliers, a large number of purchasers, and significant costs of switching suppliers.
Supplier power is strongly buttressed when a supplier has control over prices.
Suppliers in this industry are not concentrated. They act as separate groups competing for the
same project through the bid system that is prevalent in chemical Industry. Volume is of significant
concern. The, large chemical industry is not affected in terms of supply volume giving suppliers any
leverage.
The Company’s current manufacturing base includes urea nameplate capacity of 975,000 tons
per annum and blended fertilizer (NPK) capacity of 160,000 tons per year.
Buyer Power
Engro Chemical Pakistan Limited (ECPL) A premier brand and nationwide presence ensure
sellout production to Pakistani and international customers, due to flexible demand delivery and low
down payments. Buyers have power over when they are concentrated, purchase a significant portion of
new production, and pose a credible threat to purchases from competitors.

Barriers to Entry (Threat of Potential Entry)

Identifying the possibility and probability of new entrants in an industry is critical because they
can intrude on market share and profitability of existing competitors. Economies of scale, product
differentiation, capital requirements, switching costs and government policy all affect the Industry.

The economies of scale realized by Engro make it almost impossible for new entrants.
The governmental red tape that must be overcome in this industry is paramount to the success of a
prospective Fertilizer Company. Massive ecological and environment surveys must be done before
companies can begin production. The required capital and the ability to work with in the industry are
the two primary barriers to entry to the Market

The government regulates the pricing of natural gas, the most input to the fertilizer industry. Natural gas
is used a fuel and as raw material or feed stick. Previously the government's policy was to supply fuel
gas at rate pegged t high surplus Fuel oil, while feed stick at lower rates.

Threat of Substitutes
The threat of substitutes entails a consideration of such things as switching costs, buyer
inclination to substitute and the price-performance trade-off of substitutes. Most individuals would like
to make a investment with the purchase of a particular product of an organization.

Many organization do realize that substitutes are there but they must develop such a product that
satisfy their customer. When prices become exorbitantly high, Companies mainly watch out for a
decreased demand.
Degree of Competitive Rivalry
The growth rate of the Chemical market is tremendous; however, it is limited in many respects.
The growth for the demand and the production of Urea is enormous. We believe the growth in the actual
number of competitors is merely a related effect of the costly barriers to entry. The market is both
mature and developing at the same time. The maturity of the market can be illustrated by the
Interventions and helps to carry out a cost benefit analysis of a policy provided that governments know
the tradeoff between efficiency and non efficiency goals.

Michael Porter, the designer of Porter’s Five Forces, gave a speech at Harvard
Business School where he described the competitive rivalry perfectly: “There has always
been lots of companies in the industry and so there has always been an active situation of
rivalry.” But again there was plenty of room.
i