Porters Five Forces Model:

Michael Porter has identified five forces that determine the state of competitiveness in a market.
The forces also influence the profitability of firms that are already in the industry. The framework
is a useful strategic tool to evaluate potential opportunities and threats for a specific industry. Our
assigned company is Linde Bangladesh Limited that is a listed company in Dhaka & Chittagong
Stock Exchange under fuel and power industry.

Threat of new entrants: An industry where the threat of new entrants is low is perceived as an
attractive industry to conduct business. Threat of new entrants will be lower if the entry barriers
are high. Barriers to entry are the existence of high startup costs or other obstacles i.e. special tax
benefits to existing firms, patents, strong brand identity or customer loyalty, and high customer
switching costs. For the fuel and power industry, many factors affect the newest companies to
enter the business. For example, huge initial capital investment is required. Linde Bangladesh is a
supplier of industrial and medical gases. Their portfolio also holds different equipment including
ICU/CCU monitoring system, Fire Suppression System, OT Light, Stainless Steel & Bronze
Electrodes and many more. To establish a new company with an intention to maintain the same
product line of Linde Bangladesh will take a very high startup cost. In addition to that the company
has a brand identity and a loyal customer base. The switching cost for customers to another brand
will be also high because of its nature of products and services. All these factors make the low
threat of new entrants in the industry for the company.

Very Low Low Neutral High Very High

1 2 3 4 5

Threat of substitution: Customers may choose to substitute a companys product or service for
another. This is not the same as switching to a different company to use the same product but
switching products entirely. Threat of substitution is very low in our assigned industry because the
products that Linde Bangladesh offers has no replacements. For example, Compressed Oxygen,
Liquid Nitrogen, Anesthesia Machines, Dry Ice, ICU/CCU Ventilators, Nebulizer etc. has very
specific type of use. Some of their products, i.e. LPG (Liquefied Petroleum Gas) may have
substitute, but it will not affect a sixty plus product portfolio of the company.

Very Low Low Neutral High Very High

1 2 3 4 5

Bargaining power of suppliers: All companies have suppliers, whether its a manufacturing
company or a service company. Companies want to attain the best suppliers at the best price. But
if there is very little choice of suppliers, they will have more power over the company. In addition,
the suppliers will hold more power if the supplier switching cost is high. On the other hand, for a
big company, suppliers cannot create pressure as big companies buy frequently and purchase in
bulk. Linde believes in building strong, lasting relationships with their suppliers. They manage
their relationships with suppliers via seven Global Procurement Centers. These centers handle all
procurement activities in their respective regional supply markets. The supply of Linde Bangladesh
comes from Procurement Centre India. They have procurement strategies that are developed by
their central strategic procurement team. Supplier cannot create pressure over Linde Bangladesh
and thus holds a little bargaining power.

Very Low Low Neutral High Very High

1 2 3 4 5

Bargaining power of buyers: If the buyer has many choices of products and companies then their
power is high, and if buyers have high power, they can create pressure to companies, in particular
pressure to lower their product or service price. In case of Linde Bangladesh, the buyers have no
other choice to switch company. The products of Linde Bangladesh are now part and parcel of all
the industrial and medical activities of the country. Moreover, the buyers of chemical and medical
products are more interested in the quality than the price. And in most of the cases global industrial
gas benchmarks determine the price. So, again customers hold a low bargaining power.

Very Low Low Neutral High Very High

1 2 3 4 5
Competitive rivalry: It mainly focuses on how many competitor a company has, is the company
getting any benefit from competitive advantage, and whether the companys customer base is loyal
or not. Though Linde Bangladesh is listed in the fuel and power industry, and the competiveness
in the upstream sector of the industry is significantly intensive, the company faces a very less
competition due to its totally different product lines. As mentioned before, Linde is the seller of
industrial and medical gases and equipment. No other company in the industry matches its products
and services. There are some non-listed small industrial and medical gas suppliers in the market,
i.e. JMI Industrial Gas Limited, Bin Habib Bangladesh Limited with an insignificant portion of
market share and maintains a very narrow product portfolio. Again, the company gets various
advantages over its competitors due to its size, reputation and strategies.

Very Low Low Neutral High Very High

1 2 3 4 5
For Slides:

Threat of new entrants:

Very Low Low Neutral High Very High

1 2 3 4 5

Huge initial capital investment is required

Brand identity
High switching cost

Threat of substitution:

Very Low Low Neutral High Very High

1 2 3 4 5

No replacements for Lindes product

Bargaining power of suppliers:

Very Low Low Neutral High Very High

1 2 3 4 5

Large order size

Long lasting relationship with suppliers
Procurement strategies

Bargaining power of buyers:

Very Low Low Neutral High Very High

1 2 3 4 5
 No other choice to switch company
Buyers are more interested in quality
Global industrial gas benchmarks determine the price

Competitive rivalry:

Very Low Low Neutral High Very High

1 2 3 4 5

No other company in the industry matches its portfolio

Very insignificant portion of market share held by some small companies