Gun Industry Outlook

Analysis of the Eight Forces Model

Bargaining Power of Buyers- Low

The customers of the gun industry have a medium to low buyer power. Internet pricing allows the gun companies to be able to keep similar prices with each other and the raising and lowering of prices are based on competition and policies, not on customer power. The gun industry consumers are in large number but purchase in small volumes creating a lack of buyer power. The power that the gun industry consumers do have is the power to choose which gun manufacturer to make their purchase from. There are some large purchase contracts in the industry from government agencies, but for the majority the typical gun industry consumer has a medium to low buyer power.

Bargaining Power of Suppliers- High

The bargaining power of the suppliers is high. The suppliers have much power than the customers because of the manufacture’s dependence on highly specialized metals and other materials needed to meet government specifications regarding the safety and durability of the product components. Many gun manufactures also contract out parts to complete their products and the parts are extremely specialized. The bargaining power of the suppliers is going to continue to increase as the need for more specialized metal commodities increases with the technological advances of the product. The fluctuation of metal process also gives the suppliers more bargaining power over the gun manufacturing companies.

Threat of New Entrants- Low

There is a large amount of capital that is needed to create a company that can produce the amount of products needed to be competitive in the gun manufacturing industry.[1] The industry is also highly regulated at the Federal and State level making the process a meticulous one. To enter into the industry a company would have to endure high legal costs associated with getting legitimately certified. The gun industry has been a popular political topic lately and there could be increases barriers to enter this industry in the future.

The Intensity of Competitive Rivalry- High

The gun manufacturing industry is very competitive and has competitors worldwide. The rise in the capability of gun sales from the Internet has aided in the growth of the global gun industry and mad the industry more competitive. Some of the companies compete only in very specific portions of the market where as some manufactures produce a wide variety of products. There are some manufactures that create products specifically for the government but most create products for the qualified public consumers.

Threats of Substitutes- High

The large number of gun manufacturing companies in the industry creates a large number of substitutes. Many gun manufactures create similar products and the competing products use the exact same ammunition. Since there are many universal types of ammunition it creates many substitutes. Competitors often imitate trends in the gun manufacturing industry if the designs by competitors proven successful. Companies many times will try to take the competitors product and make a change to market it as better than the competitor’s model.

Complements to the Industry

The gun manufacturing industry has many complimentary parts to the gun itself. There are almost endless combinations of accessories that can be added to the gun that would only be purchased for that purpose. The factory gun is often times assessors through scopes, fore grips, flashlights, tripods, etc. and the gun accessory industry is a definite complement to the gun manufacturing industry. The sales of ammunition are a large complement to the gun manufacturing industry also. There are many different versions of the same caliber ammunition giving the consumer many choices.

Market Growth- Moderate/High

There is going to be room to grow as domestic fears are created by policies of on restrictions to gun ownership and rising crime rates. The rising domestic demand also creates opportunities for the creation of specialized weapons, which will help in growing the market. There are still untapped customer bases that the industry can still target. Recently women, who are a minority in gun ownership by gender, have been increasing in gun ownership.[2] There are plenty of factors that can combine to growth in the market for the long term.

Market Turbulence

The needs and preferences of the consumer of the gun manufacturing industry have been changing as current events influence. Customers desire more specialized weapons and there are more needs from weapons other than hunting and a handgun for self-defense. Consumers want semiautomatic assault rifles for protection and a total increase of the number of guns owned by each household. Current event are a big contributor to the turbulence to the industry and there are possible changes to come could change the industry entirely.

[1] http://www.ibisworld.com/industry/default.aspx?indid=662

[2] http://www.nytimes.com/2013/02/11/us/rising-voice-of-gun-ownership-is-female.html?pagewanted=all&_r=0