Threat of New Entrants
The e-commerce and online auctions industry is highly fragmented, with a large number of independent players occupying 78.2% of the market. With a low concentration, the two major players, Amazon and eBay, account for only 21.8% of the e-commerce and online auctions market. This indicates low barriers to entry as it not difficult for prospective competitors to establish an online shopping platform. Additionally, there are few specific skills required to participate in the market. Existing operators possess a number of competitive advantages over new entrants, such as reputation of product quality and consumer loyalty, while providing secure payment methods that have been enhanced for years. Furthermore, they also
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In response to high competition, companies had to differentiate themselves by practicing aggressive price-cut activities, including seasonal promotion and discount. Some organizations also began investing heavily in advertising and offering free shipping service as a way to attract new customers and sustain loyalty. Consequently, the industry expected to generate average profit margins amounting to 7.1% of revenue in 2014, although overhead costs remained low. Additionally, the intense competition has led to a new breed of online retailing businesses operating in a slightly different model, known as ‘social commerce.’ With attempts to generate more sales and reduce costs, websites such as Groupon and LivingSocial rely on word-of-mouth promotion and require consumer group participation in order for customers to receive a discounted price. These social commerce sites are expected to increase in popularity and contribute to overall industry growth in the upcoming years .
Power of Suppliers
The industry benefits from broad categories of businesses and individual suppliers. Since products could be obtained from numerous domestic and international suppliers, the bargaining power of suppliers is relatively low to medium. This is particularly apparent with industry giants who attract tens of millions of sellers to list products in their marketplaces, leaving each supplier with limited negotiation power. However, due to the intense
The Internet over the past few years has seen a huge increase in online businesses and consumers. Electronic-commerce is expected to generate $36 billion in revenue during 1999, up 140% from last year alone.[1] With such a huge amount of money to be made on the Internet it is becoming very appealing for small businesses and start-up companies to try and make their niche in e-commerce. The Internet is drastically affecting the way companies and people conduct business now. E-commerce encourages growth in existing as well as new businesses because of lower overhead costs, the huge consumer base and the freedom of information flow. However the online revolution has created a large
The bargaining power of suppliers is low because of the presence of powerful buyers who are able to direct terms to the suppliers who are generally small firms. Besides these suppliers of tires, parts, electronic, mechanical equipment are small players and may have only one or two clients (ancillaries).
The Bargaining Power of Suppliers (Moderate): Most of the industry’s products are sourced and manufactured by a network of third parties. The supplier group is diluted compared to the industry; KMD alone has over 45 suppliers. There is credible threat of suppliers adopting forward integration resulting in loss of major suppliers and emergence of new competitors for the industry. Highly effective and specialised products will pose high supplier switching costs for industry firms.
Bargaining Power of Suppliers: The bargaining power of suppliers in the industry is low. There are numerous suppliers in this industry, and the large department stores have the ability to negotiate for the lowest prices. In addition, the switching costs are low, as the products are not highly differentiated. There are a large volume of purchases in the industry, allowing the department stores to exert even more power over the suppliers.
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
Bargaining power of supplier: High levels of competition among suppliers act to reduce prices to producers. This is a positive for Ford Motor Company. Standardization of parts allowed Ford to reduce dependency on fixed supplier/vendor which goes into producer’s favor.
Bargaining Power of Suppliers: A producing industry requires raw materials - labour, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits. Tesco maintains direct professional business relationships with all their suppliers of organic food and non-food product worldwide. They also conduct supplier viewpoint surveys to find out what their suppliers think of Tesco.
This allows the level of buyer’s power to be medium. However, the bargaining power of supplier is also medium because there are few suppliers in the aerospace industry, enabling the companies to find a product price that achieves profit maximization. On the basis
Carter, B. (2016, Feb). E-Commerce & Online Auctions in the US. IBISWorld. Retrieved on March 30, 2016 from IBS Industry Market Research
The conclusion on the bargaining power of suppliers is high for equipment suppliers and relatively low for ingredient
ONLINE AUCTIONING SYSTEM _______________ A Thesis Presented to the Faculty of San Diego State University _______________ In Partial Fulfillment of the Requirements for the Degree Master of Science in Computer Science _______________ by Shanthi Potla Summer 2011 iii Copyright © 2011 by Shanthi Potla All Rights Reserved iv DEDICATION To all. v ABSTRACT OF THE THESIS Online Autioning System by Shanthi Potla Master of Science in Computer Science San Diego State University, 2011 The online auctioning system is a flexible solution for supporting lot- based online auctions.
In the industry the supplier’s goods are critical to buyer marketplace success. There are few major suppliers. Some of them, including Monsanto, have vertically integrated companies for the production of seed and for supply raw materials. It increased their power market. The fact that there are few major suppliers permits them to have a high bargaining power. It constitute a high threat
Bargaining power of suppliers: A boutique and diverse company holds bargaining power. GAME has the opportunity to build portenial mega stars and partner with these larger competitors.
The bargaining power of buyers stands in a direct relationship with the bargaining power of suppliers. If the bargaining power of buyers is substantial it increases the opportunity cost of suppliers. The greater the buyers concentration the greater their bargaining power. This bargaining power is also increased in markets where the suppliers’ concentration is high. The bargaining power is also increased when the cost of switching from one supplier to another is low. In instances where backward vertical integration is possible i.e. buyers setting up their own chains of suppliers the bargaining power of the buyer increases in that their prices may become more competitive. In a market where the buyers are more concerned over quality than price their bargaining power decreases as they are less inclined to shop
The high buyer power led to the intense competition within an industry by decrease the prices and bargaining for improve of the product quality. Consequently it will diminish the industry profitability. Besides, the power of buyer depends on the characteristics related to its market situation and also the how importance of its purchases compare to the buyers overall costs or purchases. (Bargaining Power of Buyers: Porter’s Five Forces Analysis, 2013)