Case Study : Porter's 5 Forces

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Porter’s 5 Forces When examining the retail grocery industry, there are clear indicators that Kroger’s has a mature market segment. The retail grocery industry has a moderate threat of new entrants. This is because there are very few barriers to enter. However, the investment and market share needed to have a successful startup is difficult to obtain. New companies face high startup costs, government regulation policies, and distribution in regards to the FDA (Food and Drug Administration). Kroger’s has a high level of economies of scale due to the fact that they are one of the largest retail grocery stores in the market. Kroger’s also has product differentiation which results from selling private brands that you can only purchase at their stores. Kroger’s displays cost advantages independent of scale due to their learning curve, being that Kroger’s was established in 1883 and has since grown to a billion dollar company. Secondly, the retail grocery industry has a high threat of rivalry. The threat of rivalry is high due to the large number of competitors in the industry (i.e. Wal-Mart, HEB, etc.). Although Kroger’s has about 16% market share, there is not one dominant firm in the industry. While Kroger’s does sell private brands, they also sell products that you can purchase at other large retailers, so product differentiation in the aspect of rivalry is low. Thirdly, the threat of substitutes is very low. There has been an increase of smaller convenience
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