Five Forces Model Essay

Both potential and existing competitors influence average industry profitability. The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents’ position (Porter, 1980b; Sanderson, 1998) The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:

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 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.

The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services. If there is a market with much choice supplier choice, bargaining power will be less.

The suppliers get the advantages of making their products be showcased for the consumers thru these retailing outlets. A wider scope of retail outlets could mean wider scope for the brand recognition of the seller’s products, that is why these retailing giants has more power than suppliers. But when it comes to distribution, having a strong supplier is important, the company be better over competitors when it comes to qualitative factors such as on time deliveries on their branches and wider network of

Suppliers have less power because there are a lot of suppliers and they all willing to accommodate and provide discounts for their customers (economies of scale).

Define: Pressure suppliers can put onto their customers by increasing prices, decreasing the quality of items, and minimizing availability

In his article “The five competitive forces that shape strategy“, Michael Porter (2008) updates and extends his “five forces” framework he first introduced in 1979 and which has influenced the academic and business research for decades. He reaffirms that “THREAT OF ENTRY”, “THE POWER OF SUPPLIERS”, “THE POWER OF BUYERS”, THE THREAT OF SUBSTITUTES”, and “RIVALRY AMONG EXISTING COMPETITORS” are the forces that shape every single industry, and a thorough understanding of such forces help analyze everything from the intensity of competition to the profitability and attractiveness of any industry. The framework has two dimensions; the vertical dimension that connects

Supplier Power: This highlights that it is easy for suppliers to rise up their prices. This is determined by the number of suppliers, the uniqueness of their product, their control over the buyer, and the cost of changing from one buyer to another. The scarcer the supplier choices you might have, and the more you need the help and that

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

This is where you are able to determine the price with your suppliers. This can happen if there are a large amount of suppliers and you are buying in bulk. This may force suppliers into a price war.

- Suppliers’ bargaining power: The company does bargains with the suppliers, suppliers are first carefully selected by carrying out bidding then a fixed price is set by multi consent then material is provided by the supplier.

If an industry is profitable, it will become a magnet to attract more competitors looking to do same business with us. If it is easy for these new entrants to enter the market, this poses a threat to the firms already competing in that market. Threat of new entrants is one of the forces that shape the competitive structure of an industry (Marc, 2014). A high threat of entry means new competitors are attracted by the profits of the industry and can enter the industry easily. New competitors entering the marketplace can make the market share and profitability of existing competitors more threaten cause the existing competitor to make some changes to existing product quality or price levels. A high threat of new entrance can make an industry more competitive and decrease profit potential for existing competitors whereas a low high threat of new entrance can make an industry less competitive and increases profit potential for the existing

The bargaining power of buyers is affected by the concentration and number of consumers, when buyer power is strong, they gain the power to choose between producers and ultimately equip themselves with bargaining power which then the producers will have to conform to in order to produce profit, under these conditions the buyer has the most influence in determining the price of products. Also when buyers have strong bargaining power in the exchange relationship, competition can be affected in several ways. Powerful buyers can bargain for lower prices, better