International Inc. Five Forces Analysis
ICON International Inc. is among the most valuable and successful companies in the world. The company is involved in corporate barter fund corporate expenses and assists companies in reestablishing value to assets that are underperforming (Ozgul, 2019). The Five Forces analysis provides insights regarding the external forces affecting the success of the company. Porter's Five Forces Model provides strategic management means useful for gauging the five forces which affect the company: competition, customers, new entrants, suppliers, and substitutes (Grundy, 2016). ICON International Inc. Five Force analysis illuminates what measures the company takes to guarantee industry leadership regardless of the negative impacts of external forces in the competitive environment of corporate barters, which include companies like Active International Ltd, Prospect Capital Corp, Virtual Barter, Monroe Capital LLC, and JG Wentworth Co. Established in 1986, ICON International has managed to maintain its position in the industry under the management of John Kramer.
This Five Forces analysis of ICON International Inc. points to competitive rivalry as the main force for consideration in the strategic formulation of the company. Even so, all of Porter's five forces affect the business situation of the company. ICON International's strategies are partially built on the necessity to handle forces present in the external business landscape. These forces can greatly affect the company's development potential, market share, profitability, and revenues (Bruijl & Gerard, 2018). The Five Forces include competitive rivalry, bargaining power of ICON International customers, bargaining power of ICON International suppliers, threats of substitutes, and the threat of New Entry.
ICON experiences strong competition or competitive rivalry. This factor of the Five Forces analysis framework is the determinant of the degree of impact that competing firms have on one another. In the case of ICON, this influence is based on the diversity of services offered, quality of services, and favorable price negotiations (Marchant, 2020). Companies like Active International and Orion Trading are ICON International's most aggressive competitors. Such aggressive competition, evident in imitation, advertising, and speedy innovation, creates a strong force in the environment of the industry. However, ICON International has managed to maintain a competitive advantage by ensuring the fulfillment of its clients. For instance, when ICON buys an asset from another firm, the firm gets payment in a trade credit form. ICON pays considerably more for the assets which they obtain, usually higher than the market liquidation value, and provides goods and services at a reasonable price (Marchant, 2020). The goods and services offered by ICON International include travel services, media, shipping, printing, and ongoing business expenditures in a well-structured package deal. Also, ICON International purchases diverse assets from airplanes, vitamins, car parts, pharmaceuticals, and clothing. The diversity of the company's operations has enabled it to maintain a strong competitive advantage in the industry.
On the other hand, ICON's competitors, like Active International, offer equally similar services. Thus, it is easier for a firm to switch from ICON to other corporate barter firms based on services and other related concerns. In the Five Forces analysis framework, this condition forms a strong force for clients to switch to other firms offering similar services. These external factors result in a high competition that is part of the most important considerations in the strategic management of ICON International.
Bargaining Power of ICON International Buyers
Buyers' bargaining power is a moderate factor affecting ICON International's operations. This factor of the Five Forces analysis framework determines the purchasing decisions of clients and associated preferences. In the case of ICON International, clients' bargaining power relies on external factors such as higher buyer information and the low cost of switching to other competitive firms. It is easy for clients to seek services from a different firm, thus making them significant in compelling firms like ICON to guarantee client satisfaction. The bargaining power of clients also depends on the urgency with which they want to get rid of an asset since there are costs incurred the more a less-valuable asset rests in their warehouse as it depreciates in value over time. Porter's Five Forces model posits that these circumstances make clients weak at the primary level.
Nonetheless, the accessibility of comprehensive information regarding competing firms' offers allows buyers to shift from one company to another. This factor in the external environment enables buyers to impose a strong force on ICON International and competitive firms. Therefore, this section of the Five Forces analysis depicts that ICON International must incorporate buyers' bargaining power as one of the most important strategic management considerations in the business.
Bargaining Power of ICON International Suppliers
Powerful suppliers may benefit more than the company that integrates the inputs of different suppliers to provide services to the end client (Bruijl & Gerard, 2018). In the case of ICON, suppliers have weak bargaining power. This factor of the Five Forces analysis framework determines suppliers' impact in imposing their wants on the firm and its competitors. The bargaining power of suppliers in the case of ICON is weak because the company's accessibility to capital reserves is unmatched (Marchant, 2020). This enables the company to constantly invest in industries that are capacity-oriented, like travel and printing, sourcing procurement solutions, and media, which the firm then gives for trade credit redemption. Moreover, Omnicom Group, ICON International's parent company, is among the largest marketing communications and advertising businesses. The global nature of ICON International's network provides the company accessibility to well-established suppliers around the globe. In the Five Forces analysis model, the evident reliable and well-established suppliers are a component that presents a weak force against the firm. Likewise, the high accessibility to goods and services it offers, like media services, transport and shipping services, and printing services, makes suppliers weak in putting their demands on companies like ICON International. Therefore, this component of the Five Forces analysis depicts that suppliers' bargaining power is a weak issue in the supply chain strategies of ICON International. This places the company in a better position in the industry and enables it to exercise more authority in imposing its demands on suppliers.
Threat of Substitutes
The threat of substitution is a weak force impacting ICON International operations. This part of the Five Forces model outlines the capacity of a substitute's means to attract clients (Bruijl & Gerard, 2018). In reality, the operations of the corporate barter firms are unique, and there is no real threat of a substitute. In some circumstances, a company may sell a less-valuable asset back to the manufacturer at a surprisingly low cost. Often, companies can lease out their assets to banks when taking loans to act as leverage, though, on full repayment of the loans, they can acquire their assets back. This does not help companies that want to get rid of less valuable assets and, therefore, cannot be regarded as a substitute. The lack of an equal substitute is an external factor that imposes weak forces on the industry's environment.
Most of the companies interested in offloading an asset they regard less valuable would rather use the services offered by corporate barter firms instead of any substitute that may exist in the market. This is because corporate barter firms, like ICON International, purchase those assets and a relatively higher price and, in turn, offer goods and services needed by the company at low costs. This external factor makes clients have a low propensity for alternatives. For example, customers would opt for services offered by ICON International and its competitors than reselling the less-valuable asset to a second-hand shop.
Threats of New Entry
ICON International Inc. faces a moderate threat to a new entry. This part of the Five Forces analysis framework shows the impact and probability of new competitors in the industry. In the case of ICON International, new entrants impose a moderate force due to the following external components: (1) it is costly to develop a brand, and (2) high capital demands. Developing a company to rise to the levels of ICON International Inc. demands high capital. Moreover, it is highly costly to establish a strong brand to meet the standards set by big companies like ICON. Therefore, these external forces make new entrants weak.
Nonetheless, there exist large companies with the financial capability to enter the market. For instance, well-established firms like Omnicom Group, which is a major supplier of ICON International, may seek to deal with end users directly and deliver services to them directly. This posits that large firms with already established brands possess the potential to switch their operations to match those of corporate barter companies like ICON International, thereby directly competing against them. This section of the Five Forces analysis model depicts that ICON International has to uphold its competitive advantage via marketing, innovation, and diversity in its operations to stay ahead in the industry and remain invulnerable against the moderate competitive force of new entrants.
Drivers for Change
By ensuring continuous and speedy innovation, ICON International adequately handles the Five Forces in its external landscape, even though much of the efforts are skewed towards strengthening the company's position against competitors and keep attracting prospective clients. An applicable driver for change is to increase research and development in regard to evaluation of the monetary value of the assets sold by the buyers so that they can receive goods and services that matches the value of the asset sold (Ozgul, 2019). This move will ensure a common measure of value hence ensuring both company’s and buyers’ satisfaction.
Porter's Five Forces Analysis of ICON International Inc. reveals that competitive rivalry presents a strong external force to the business. The firm's closest rival is Active International, under the leadership of Alan Elkin. Therefore, to maintain its position in the industry, ICON International has sought to improve customer satisfaction by offering the best range of services to match its competitors. The bargaining power of buyers in ICON International is moderate. Buyers are well informed, and there is a low cost of switching to competitive firms in the industry. The firms are also well placed to offer goods and services needed by the buyers at an affordable price. The bargaining power of the suppliers and threats of substitutes present weak forces against the operations of ICON International. On the other hand, the threat of new entrants imposes a moderate force on ICON International since, as much as it is costly to begin such operations and establish a brand, there exist large companies that are well positioned to enter the market and compete with the already established firms.
Bruijl, D., & Gerard, H. T. (2018). The relevance of Porter's five forces in today's innovative and changing business environment. Available at SSRN 3192207.
Grundy, T. (2016). Rethinking and reinventing Michael Porter's five forces model. Strategic change, 15(5), 213-229.
ICON International, Inc.. Icon-intl.com. (2022). Retrieved 28 August 2022, from http://www.icon-intl.com/.
Marchant, R. (2020). The only 10-year Top Workplaces winner is an ICON that values people. Connecticut Post. Retrieved 28 August 2022, from https://www.ctpost.com/topworkplaces/article/The-only-10-year-winner-is-an-ICON-that-values-15586804.php.
Ozgul, U. Y. A. N. (2019). Barter System As An Innovative And Alternative Financial And Trade Model During The Periods Of Economic Crisis And Recession And Its Importance For Businesses. PressAcademia Procedia, 4(1), 340-348.