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The Five Competitive Forces Model Of Competition

Decent Essays
The five competitive forces that comprise the five-forces model of competition are, competitive pressures stemming from
• Buyer bargaining power
• Pressures coming from companies in other industries to win buyers over to substitute products
• Suppliers bargaining power
• Associated with the threat of new entrants into the market.
• Associated with rivalry among competing sellers to attract customers. This is usually the strongest of the five competitive forces.
Buyer Bargaining Power
Buyers (customers) have bargaining power when they are strong enough to be able to put collective pressure on the companies producing a product or a service. This power is highest when buyers are able to gather together and amount for a large percentage of the producer’s sales revenue or when there is a number of suppliers providing the same type of product. In short buyers with strong bargaining power can limit industry profitability by demanding price concession, better payment terms, or additional features and services that increase industry. Because Walmart is known for being one of the largest retail organizations, it has high bargaining power and can insist on lower prices, higher-quality products or additional services. Walmart has been known to demand that suppliers alter their distribution systems to accommodate their desire to reduce the inventory it holds in its warehouse. Because of high competition among suppliers, they will have a long-term positive impact on this entity.
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