Executive Summary. As The Us Supermarket Industry, Has

874 WordsApr 11, 20174 Pages
Executive Summary As the US supermarket industry, has become highly competitive we seek to grow our market share through an acquisition. After reviewing the industry, we found that Sprouts Farmers Markets is a potential target to acquire. Sprouts is an ideal merger due to their large selection of affordable organic produce (“History – Sprouts Farmers Market”, 2017). This merger will make the company more competitive with industry leaders such as Walmart. This would be a favorable move for Sprouts. The potential deal “would help [Sprouts] lower costs and price more aggressively” within the industry (Adeniyi, 2017). A Sprouts consolidation would allow the company to compete with discount chains and boutique markets such as Whole…show more content…
The five forces model helps determine an industry’s attractiveness and long-term profitability. The five forces are: degree of rivalry within the industry, the threat of substitutes, the threat of new entrants, bargaining power of buyers, and bargaining power of supplier. The industry’s competition is very high. Supermarkets compete heavily on price, service, and quality. Retail giant Walmart is currently the industry leader with a market share of 17.3% followed by Kroger with 8.96% as of 2016 ("Food market share grocery retailers United States, 2016 | Statistic", 2017). The degree of rivalry is very high and profit margins are low. The competition over the last several years has become higher due to the industry’s trend of consolidations. Consumers have low switching costs therefore they can easily switch amongst retailers. In order to compete in this market, we must continue to provide superior differentiated products which is the motivation on this acquisition. The entry barriers for the supermarket industry are high. The main challenge for a new entrant is the cost of capital. The largest capital for a supermarket would be its facilities. A new entrant also would have to consider its economies of scale. Economies of scale are achieved through large volumes of production which results in low costs, which can be difficult for a new entrant. Another challenge for a new
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