Michael Porter's Five Forces model offers a framework to study the global Pressure Regulating Valves market. Strategic business managers trying to gain an edge over competing firms in the global Pressure Regulating Valves market can utilize this model to better comprehend the company's industry. The components of each force and the degree of impact of each element in the context of the global Pressure Regulating Valves market have been broken down and analyzed.
Porter’s five forces model: Global Pressure Regulating Valves Market
Bargaining Power of Suppliers
Globally, suppliers of Pressure Regulating Valves (PRV) have moderate bargaining power. This is mainly a result of having several sources for essential raw materials - namely carbon steel, stainless steel, brass/bronze and engineering plastics - available to valve makers all over the world. As a result, there is no single source of raw material from which a valve manufacturer has to purchase their raw materials and instead they are able to purchase from many Regional Sources and International Sources, which encourages competition between suppliers and provides a greater opportunity for price negotiation by Valve Manufacturers. The Competitiveness of base metals used to manufacture Valves increases competition even further by lowering the value of all base metals and increases the number of suppliers available to produce lower and medium pressure valve products compared to higher pressure, hygienic and life-safety applications. On the other hand, for applications where special Alloys, Precision Castings or Certified Materials are needed for higher-pressure, hygienic or critically life-safety applications, the Suppliers have a larger percentage of Influence associated with them since only a small number of Suppliers meet the metallurgical requirements of the Material to manufacture these items with high, uniform Quality, Traceability and Regulatory Compliance.
Therefore, a Manufacturer’s Switching Costs increase, thereby further increasing the Supplier’s Influence. Lastly, regardless of interest or influence from a supplier on the Manufacturer, particularly with respect to lower volume Specialized Products, Large Valve Manufacturers continue to mitigate the Supplier’s influence by implementing Long-term Contracts, Dual Sourcing Strategies and In-house Machining and Testing Capabilities. Therefore, although Localized Suppliers exert influence on certain Specialized Manufacturers, on balance, the ability of the Supply Base to provide a competitive advantage, keeps Supplier Bargaining Power at a Moderate Level.
Hence, the bargaining power of suppliers in the global Pressure Regulating Valves market is expected to be moderate
Bargaining Power of Buyers
The global market for Pressure Regulating Valves (PRV) has moderate/high buyer bargaining power. The larger end-users of PRVs, such as municipal utilities, EPC contractors, oil & gas operators, and factories/process facilities, will buy in bulk and through formal bidding procedures. The majority of buyers are very price conscious and will compare several vendors, therefore giving them a significant negotiating advantage. Health-care/medical Supply Chain Management and Public Sector Procurement frameworks put a significant pressure on costs/margins to be competitive and comply with regulations. This makes the procurement process more competitive for buyers. On the other hand, buyers' negotiating power is limited due to technical specifications, certification requirements, and performance reliability of certain applications such as pressure-critical and safety-regulated. For example, if a buyer were to use an approved design or supplier for a valve, that buyer cannot replace it easily without going through a re-certification process. Additionally, when valves are engineered into a particular system or are included in longer-term maintenance contracts, switching costs can be quite high. Therefore, although buyers exert a lot of pressure on prices and terms of sale through negotiations, in specialized applications, buyers have less opportunity to dictate who they buy from.
Hence, the bargaining power of buyers in the global Pressure Regulating Valves market is expected to be moderate to high.
Threat of New Entrants
The possibility of new competitors in the Market for Global Pressure Regulating Valves is relatively low to moderate in terms of threat. The entry into manufacturing of Self-Operating pressure regulating valves is high due to the difficulty in gaining certification through compliance with Pressure Equipment Regulations, proving product performance in the field, needing high startup capital for investment into testing facilities, and compliance with certification costs. Long qualification times exist for utilities, EPCs, and industrial customers to verify proven field performance by new entrance manufacturers. The established manufacturers have a strong brand name that new players cannot duplicate easily. Additionally, established manufacturers have the benefit of being able to use their reputation and track record as referral installations. Having an established vendor status also creates an advantage over any new players entering the market. In addition to this, established manufacturers can achieve greater economies of scale through their ability to purchase materials, castings, and machining at significant cost savings compared to new manufacturers. There are also opportunities for regional or specialized manufacturers of niche applications such as low-pressure, localized, or application-specific pressure regulating valves which will decrease the overall entry barriers.
Hence, the threat of new entrants in the global Pressure Regulating Valves market is expected to be low to moderate.
Threat of Substitutes
The level of threat posed by substitutes in the global market for pressure-regulating valves is regarded as moderate. The three most important substitute products are automated control valves, electronically activated pressure regulators and variable speed pumps that control pressure in a dynamic manner. The usage of these products is growing in digitally advanced industrial plants and smart utility networks that value the capability to monitor and optimise in real-time. However, under certain conditions where there is a demand for power independence, fail-safe operation, ease of use and low maintenance costs, substitutes cannot compete with pressure regulating valves. As a result, pressure regulating valves are well-positioned for use in remote environments, where a majority of legacy systems are located, and fields where safety is of primary concern and where cost is a limiting factor. In addition, automated systems typically require more upfront cost, training and continuous adjustments to perform optimally, creating barriers to entry for some end-user markets.
Hence, the threat of substitutes in the global Pressure Regulating Valves market is expected to be moderate.
Intensity of Rivalry
The competitive rivalry that exists within the global Pressure Regulating Valves marketplace is fierce. It is characterised by a plethora of regional, national and global companies battling it out on the basis of price, product quality, warranty coverage, and delivery lead times. The level of price competition is particularly strong in the water and building services areas where there are a number of standardised product categories with very few opportunities for differentiation on technical merits. As a consequence, there is an increased level of competitiveness. For the higher specification segments (oil & gas, power generation, and hygienic industries), the competitive rivalry primarily involves evaluating engineering capabilities, breadth of product compliance, and lifetime support options.
