Best Buy 5 Forces

External and internal factors come in many forms that can impact a business in different ways. Assessing external and internal factors that an organization may face can be vital to the planning function of management. As with any organization, there are always four functions of management. These functions are planning, organizing, leading, and controlling (Bateman & Snell, 2009, p. 19). Within the organization, Best Buy, which is known to be an electronics store, has their own external and internal factors. Founded in 1966 as Sound of Music and incorporating in 1983 to become Best Buy, Inc. (Ask.com, 2010, para. 1), accounting for 19% of the market (Metaweb, 2010, para. 1), has become one of the

The power of buyers in the industry varies at different levels depending on the field. For pharmaceutical drug companies, which have thousands of patients, customers have lower price sensitivity as they are rarely able to refuse the treatments they need and they have low bargaining leverage due to commonly lack of information as well as knowledge on the drugs. For biotech firms that distribute specialized products to the government and hospitals, their customers actually have more of a bargaining power due to being the sole consumer sources

The retail industry is a highly competitive and mature. For this reason, above-average returns can only be obtained by competitive actions and responses against competitors. Porter five forces model will be used to analysis the development and competition situation in retail industry.

The threat of entry of the supermarket industry in US is low, which base on the analysis of the three major sources that related to the entry barriers. The first barrier is the economies of scale of the existing large supermarkets. When these incumbents achieved larger volume sales, they can have lower unit costs than new entrants, and it will very difficult for those new entrants to compete with them (Johnson, Whittington, &Scholes 2011). For example, Wal-Mart had invested in innovative procurement, automated distribution centre and bar coding to increase its economies of scale, and these investments created a great barriers for new small retailers to enter into the supermarket industry (Porter 2008). The second barrier is the incumbency advantages, which mean the incumbents established their own strengths that cannot be used by competitors (Porter 2008). For example, the top ten supermarkets in US have accumulated extensive experiences on how to run their businesses more efficiently than new entrants (Johnson, Whittington, &Scholes 2011). The subtle differentiation between the products that sold in supermarkets is the third barrier for new entrants. Because most of the product assortment is same or similar between each supermarket,

A host of internal and external factors plays an important role in the organizational structure and process. The opportunities for Best Buy are economies of scale, targeting new market segmentation and global expansion. Strong competition, growth in online sales and the new developments in government regulation are the threat for the Best Buy. Competitions in the electronics industry are based on several factors such as price, quality, durability, product features, customer preferences and warranties. With the advancement in the ecommerce and internet, Best Buy acquired many internet

The first of Porter’s Five Forces is the threat of new entrants. According to the case study, there has been a wave of new entrants to the retail industry. These include Best Buy, Costco, Wal-Mart, Old Navy and the recently irrelevant, Target Canada. The second force, the threat of substitute products or services, is also prevalent in the retail market. Inevitably, the target audience that the Hudson’s Bay Company is trying to cater to, will shop at other retail stores for the same goods due to consumers behaviours and preferences. Another impacting force is the bargaining power of suppliers. However, this force does not play as large of an impact to HBC as one might initially assume. Traditionally, HBC among other large retail stores makes a large percentage of their

Bargaining Power of Buyers: The bargaining power of buyers is high in the department store retail industry. The volume of buyers is high, and buyers are very price sensitive in this industry. The products are not highly differentiated, and there are numerous stores that offer the same, or similar, products, giving buyers the opportunity to search for the lowest prices and information. The industry has substitutes available in the form of specialty, differentiated products and stores. This increases the power of buyers,

Bargaining power of buyers is medium-high because of the low switching costs and wider spectrum of similar products selling at competitive prices due to the influence of developing countries

The bargaining power of customers determines how much customers can impose pressure on margins and volumes.

The industry does not possess major threat from new entrants due to strong barriers to entry and strong competition for retail space. There is also a strong rivalry between competitors as limited space is being contested by major players alongside

The first of Porter’s Five Forces that impact Costco is the threat of new entrants. The threat of new entrants into the wholesale and membership retail space is low. There are several reasons why the threat of entrants into the market is low. The leading reason why the threat of entry is low is because an emerging company will struggle to have the volume necessary to compete with Costco. Costco is the sixth largest retailer in the U.S. As a major retailer, Costco has the highest discounts on a majority of its

Potential new entrants into the market are a low threat for Costco. We have the advantage of economies of scale and having learned by doing. Our economies of scale come from better management coordination of processes, long term relationships with our suppliers, and enhanced employee performance with low turnover (Pearce et al., p. 100). The cost for a new entrant would be significant given the capital investment required to start up a warehouse business. Any

Bargaining power of buyers: Businesses and individuals all fall under the customer's category for this industry. Big customers do get volume discounts and can negotiate prices with sales representatives. However smaller customers have to take what is being offered to them. The only say they have is that they can switch between the players, but due to intense competition, the prices offered are generally the same across the service band.

New Entrants – The threat of new entrants is moderate. Moderate because of the high cost of entry, but the relatively successful business model Best Buy has outlined.

There are two different buyers in the industry; businesses and consumers. The bargaining power of business buyers is high. Business buyers are the biggest purchasers of Corning’s products. They purchase Corning’s glass and ceramics as by-products for subsequent manufacturing of other goods. Business buyers are sensitive to the price of Corning’s products, as slight differences in material prices would impact the cost of production. Conversely, the bargaining power of the consumer buyers is low. Consumer buyers do not have as much bargaining leverage when compared to business buyers.