Utilisation of Porter’s Five Forces Model in Evaluation of a New Market with Reference to Tesco
Jeewan Pudasaini
Greenwich University
BA (Hons) in Business Studies 2011
Utilisation of Porter’s Five Forces Model in Evaluation of a New Market with Reference to Tesco
Jeewan Pudasaini
Blake Hall College
Submitted To
University of Greenwich in accordance with the requirement of BA (Hons) in Business Studies
December 2011
Word count: 2905
Contents
Introduction
1. Porters’ Model: 4 1.1 Threats of new entrants: 4 1.2 Degree of rivalry: 4 1.3 Threats of substitute: 5 1.4 Suppliers’ power: 5 1.5 Buyers’ power: 5
2. Tesco 6
3. Application of Porters’ Model in Tesco with respect to new
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2. Tesco
Tesco is one of the biggest British retailer and the world’s third largest retailer across Europe, USA and Asia. The main vision of Tesco is to be the most highly valued from the customer with accordance to the service it served, even by the communities where they serve their service. Similarly the loyal and committed staffs are the main key elements of the Tesco from which the customers can get full service. Thinking locally and acting globally usually resemble the business strategy of the Tesco. Tesco has made certain values which made them to be the market leader in retail industry. The fundamental principles of Tesco are to understand the customers, be first to meet their needs, acting responsibly for the communities, work as a team, trust and respect each other, share knowledge and experience (TESCO plc, 2011). The main aim of Tesco is to benefit their performance and competitiveness with the utilisation of the skills and scale of the group.
As per the annual statement provided by the Tesco, it reveals that Tesco has shown excellent growth in Europe and Asian as well as encouraging performance in newly setup market in United States. Certain core objectives are been focused as substantial changes in UK business to sharpen execution and competitiveness for the customers.
The case is about Loblaw companies Inc., a highly successful grocery chain in Canada. Loblaw is Canada’s largest food distributor. The major issue is the emergence of Wal-Mart, who is looking to pursue expanding their grocery line chain in the Canadian market. According to Yunna (2014), porter’s five forces model has been widely applied to analyze industry competition in various markets. Using Porter’s 5 Forces to analysis the issues of the case can be a useful tool in summarizing the attractiveness of the market or industry. According to Dobbs (2012), the five forces are the threats posed by competitive rivalry, powerful buyers, powerful suppliers, potential new entrants, and substitute products. The analysis of Porter’s five forces framework can be viewed in figure 1. The case describes the retailer-supplier relationships as power plays. As the scale would tilt in favor of the one wielding the most clout at a point in time. There are numerous manufacturers with various substitutions among the grocery store. However, a supermarket would lease out shelf space for rent. The manufacturers would pay the grocery store a combination of different allowance to obtain secure shelf and warehouse positions for its products. Ultimately the category manager had the final word, which left the manufacturers with little to no bargaining power.
To assess the industry structure and profitability, a Five Forces analysis will be conducted on the department store-retail industry.
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Porter 's five forces framework assesses the competitive pressures a company faces within the industry. The five forces of competitive pressure include: competition from rival sellers, competition from potential new entrants to the industry, competition from producers of substitute products, supplier bargaining power and customer bargaining power. The model helps us determine the strength of competitive pressures and profitability of an industry. [3]
Porter's Five Forces is a simple but powerful tool that consist of 5 different forces to understand the competitiveness of your business environment, and for identifying your strategy's potential profitability. The five forces are degree of rivalry, threat of entry, threat of substitutions, buyer power, and supplier power. Each force is helpful in their own way to get to know your rivals a lot better and get to know what can happen in your market.
Porter 's Five Forces Model is a critical instrument to break down an outer aggressive environment of the business. The model incorporates threat of entry, the threat of rivalry, the threat of suppliers, the threat of purchasers and threat of substitutes.
This essay will use the Porter’s five forces to analyse the supermarket industry in the US, and I will make a decision on whether the US supermarket industry is attractiveness based on its overall profitability level.
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The Porter Five forces analysis is a structure for business management developed by Michael Porter in 1979. It uses concepts developed in Industrial Organization economics to derive five forces that determine the attractiveness of a market. Porter referred to these forces as the microenvironment, to contrast it with the more general term microenvironment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. This concept involves a relationship between competitors within an industry, potential competitors, suppliers, buyers and alternative solutions to the problem being addressed. A change in any of the forces normally requires a company to re-assess the marketplace.
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The Corporate Steering Wheel has delivered an impressive performance of Tesco in line with its corporate goals and mission. Each of the five perspectives has assist and transformed Tesco to be well positioned for long term growth. David Reid, the Chairman reported that the Tesco team has once again delivered a good set of results for the year 2010. Even as the markets around the world are emerging from recession, each part of Tesco’s business is well positioned to pursue its
The Porter Five Forces has been developed in 1979 to analyse industry’s affective and profitability. It is a famous tool for gaining insight into the overall fashion apparel industry and more importantly the role of Creación with a variety of key factors affecting the company itself. The Porters Five Force model comprises competitive rivalry within an industry, threat of new entrants, threat of substitutes, bargaining power of suppliers and bargaining power of buyers.
The Porter`s five forces are threats of new entrants, the bargaining power of buyers ,product substitution and intensity of rival of rival among competitors .These forces measure the competitiveness of the market and also helps the company to identify strategies to use to penetrate such and gain market share.