The five key factors the model uses to identify and evaluate potential opportunities and risk are risk of entry by potential competitors, threat of substitutes, bargaining power of suppliers, bargaining power of buyers and intensity of rivalry among established firms. As for The Co-operative, I consider that they barely have risk of entry by potential competitors. The most important reason is the price of products. Just I mentioned above, this grocery retailer tend to create strategy of low price in this industry. As we known, low price strategy will make most potential competitors give up, the key factor is low price will cause them cannot compete existing enterprises. After all, most of existing grocer y retailers have existing distribution and customers, thus they can control their price of products lower than new entrants. That is the main reason why they face lower risk of entry by potential competitors. At the same time, large economic scale results in them have power to bargain the price and control the cost, thus this retailer can get the fantastic price from the suppliers. Finally, most customers will be attracted by their low price products. This phenomenon shows that they are the higher bargaining power of buyers in this industry. In the most of case, lower price equal this retailer has larger bargaining power. Just like a theory of economy, if buyer want to buy many products and has large-scale economy, these factors will make them have very strong power to
forces. Retaliation by incumbent competitors is an important element in determining the threat of new entry. Specifically, Whole Foods faces a threat from conventional supermarkets and mass merchandisers who may move to carry organic products within their stores.
The grocery industry has a relatively high market commonality; a lot of grocery stores are somewhat related in terms of technologies used, labor force and the products or services offered in the stores. Differentiation with other competitors is key for survival in this highly competitive industry.
Competitive environments are defined by the identity, track record, financial strength and market share of key competitors. Harvard Professor Michael Porter 's Five Forces model can be used to evaluate a company 's competitive position. These five forces are barriers to entry (the ability of new players to enter the market), buyer power (the ability of customers to influence price),
1. The grocery industry is a commoditized industry, which makes it difficult for grocers to sustain through differentiation. Buyer power is high and thus, cost leadership and operational efficiencies are critical. There is fierce competition amongst various grocery stores, with the main players such as Loblaw and A&P holding multi-banner stores in various market segments. Traditional grocery stores also lose some of their market share to drug stores, convenience stores and other retailers who have entered the industry. Threat of substitutes from fast-food and take- away outlets is not as prevalent, since many grocery stores have started stocking ready-to-eat meals and have deli services available for consumers. Competitive
The threat of entry of the supermarket industry in US is low, which base on the analysis of the three major sources that related to the entry barriers. The first barrier is the economies of scale of the existing large supermarkets. When these incumbents achieved larger volume sales, they can have lower unit costs than new entrants, and it will very difficult for those new entrants to compete with them (Johnson, Whittington, &Scholes 2011). For example, Wal-Mart had invested in innovative procurement, automated distribution centre and bar coding to increase its economies of scale, and these investments created a great barriers for new small retailers to enter into the supermarket industry (Porter 2008). The second barrier is the incumbency advantages, which mean the incumbents established their own strengths that cannot be used by competitors (Porter 2008). For example, the top ten supermarkets in US have accumulated extensive experiences on how to run their businesses more efficiently than new entrants (Johnson, Whittington, &Scholes 2011). The subtle differentiation between the products that sold in supermarkets is the third barrier for new entrants. Because most of the product assortment is same or similar between each supermarket,
Trader Joe's faces several threats to its business, as competitors try to invade the company’s niche and attempt to imitate the company’s core strategies. The supermarket industry itself faces a major threat, as larger chains such as grocery retailers Wal-Mart and Tesco have begun to open small-format stores that mimic the Trader Joe's approach. This invasion results in additional cost pressure for incumbents like Trader Joe’s, which had to let go employees in order to become more cost competitive.
Barriers will be placed on all new supermarkets entering the sector; this will be from the existing supermarkets. For example Tesco may have cornered the market for certain goods therefore has established a relationship with its supplier so that it will pay a lot less for large volumes of goods whereas the new supermarket will not be able to find cheap, reliable suppliers this gives Tesco's the advantage of economics of scale. A new, small supermarket chain can only buy a relatively small volume of goods, at a higher
SFCHC must also analyze other factors such as buyers and customers, resource availability for expansion, competitor activity, new technologies and substitutes, and potential competitors (White & Griffith, 2016, p.509). These factors will help the board understand the profile needs of the organization and identify areas of opportunities to ultimately help develop a sound strategic plan (White & Griffith, 2016).
Answer: According to professor Michael Porter, the five forces are suppliers, customers, competitors, new entrants, and substitutes. The “plus” part of the model takes into account the elements outside the industry like technology, population and security, politics and economics, energy, and environment.
This semester in CPD VI, I sat down and determined what my critical factors are to help me better find the best fit for me in terms of where I want to work after graduation. A little over a year ago in CPD III I made a list of the top ten critical factors like I did this year. After comparing the two lists from CPD III and CPD IV side by side I realized that a majority of the critical factors were the same. The main difference that I seen was mostly the order of the critical factors from most important to lest important. At this stage of my career it is important for me to determine my critical factors and choose rotation sites that are best suited for me so that I can get the most out of my experiences.
Based on the metrics provided in the case about Hanover, Indiana, it consists of moderate to low income families. Consequently, the high quality approach would probably push Bob’s Supermarket into too small of a niche market. However, the location of the supermarket provides Bob’s Supermarket an enormous advantage, if they are able to offer product at prices close to the chain stores. Therefore, it would be advised that Bob’s Supermarket partners with IGA to low their product cost and past the added savings on to the consumer. While short-term profits would certainly decrease, long-term product movement would increase as local consumers elect to perform all shopping at nearby store rather than making the 10-mile drive to the other chain stores.
In the USA supermarket industry, the threat of a new entrance is relatively low. This consideration is achieved by the advantages that already had by the incumbents. For example, Walmart that was considered as a leader in sales for supermarket in USA,[1] Walmart even already grasped the US market share in 1990 with 41%[2], Walmart had a market presence, buying power and breadth of inventory. Moreover, Walmart also spent large amount of capital investment for its IT division and distribution logistics. Walmarts had IT capability to check individual product sales. In consequences, Walmart is the only retailer that can provide real-time
4. An analysis of the industry, i.e., degree of competition, growth of industry-wide sales, profitability of competitors, life cycle stage of the industry, Porter’s five factors, and P/E ratios of competing companies.
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.
Analyze the competitive environment by listing the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in the industry (Chapter 2). Summarize your key points in a Figure. (25 points)