Five Forces Model of Competition

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Five Forces Model of Competition

Introduction

The influence of Porter’s five forces differs by industry. Whatever the industry, the five forces affect the profitability as they influence the costs, the prices, and capital investment necessary for survival as well as competition in the relevant industry (Hill, 2008). The five forces model assists in strategic decision making processes as it is utilized by the managers to establish the competitive structure of the industry (Borge, 2005).

(Fred, 2007).

Porter’s Five Forces in Wal-Mart

A brief illustration using Wal-Mart’s in the consumer retail industry in relation to the relevant industry forces.

Potential Rivals: Medium pressure

Other grocers may potentially penetrate the retail industry.

Entry barriers may be relatively high, since Wal-Mart has an exceptional distribution system, brand name, strategic locations, as well as financial capital to dissuade rivals.

Wal-Mart regularly has a supreme cost advantage over rivals.

Rivalry amongst Established Companies: Medium Pressure

At the moment, there are three major incumbent firms in the market. These are Sears, Target, and K-Mart .Target is regarded as the most influential among the three in regard to retail.

Target may have experienced remarkable growth in the domestic market and has effectively defined its niche.

Buyers Bargaining Power: Low pressure

Individual buyer’s bear little pressure.

Consumer activist groups have criticized pricing techniques used at Wal-Mart.

The consumer may shop at a rival who grants comparable goods at comparable prices, although the convenience would be lost.

Suppliers Bargaining Power: Low to Medium pressure

Wal-Mart holds a huge portion of the market share, and it offers huge business to wholesalers and manufacturers. This presents Wal-Mart with much influence since if Wal-Mart threatens to switch suppliers, this may create a scare tactics to suppliers.

Wal-Mart has the ability to integrate vertically.

Substitute Products: Low pressure

The substitutes that grant low pricing and convenience are few.

Online shopping presents another alternative since it is different and the customer may gain price advantage for the company may not necessarily have a physical store, thus passing savings to consumers.

Complementors: Low pressure

Sam’s Wholesale Clubs is a Wal-Mart complementor in that it complements Wal-Mart through offering similar goods in wholesale, thus making the Wal-Mart increasingly profitable.

Suppliers require innovative products to draw customers.

Porter’s Five Forces in GreenTree Cooperative Grocery Mt. Pleasant, MI

The GreenTree Cooperative endeavors to provide earth-friendly, healthy food that complies with high quality standards. It also provides education and information to the greater society, which facilitates customers in making informed choices concerning their health and their influence on the larger environment.

Potential Rivals: High Pressure

Other grocers can easily infiltrate the food retail industry.

Entry barriers are relatively low, since GreenTree Cooperative does not have a far-reaching distribution system, an established brand name, or the requisite financial capital to discourage rivals.

Rivalry amongst Established Companies: High Pressure

Presently, there are numerous outlets that are retailing in healthy organic foods

The industry’s life cycle is mature.

Buyers Bargaining Power: Low pressure

Individual buyer’s bear minimal pressure.

Consumer activist groups have supported the consumption of organic foods in recent years.

Suppliers Bargaining Power: Low to Medium pressure

GreenTree Cooperative holds a sizeable portion of the market share in the organic food retail market, and it offers huge business to the wholesalers and growers. This presents GreenTree Cooperative with much influence it has a well established network of suppliers.

Substitute Products: Low pressure

The substitutes in organic foods are few.

GreenTree Cooperative also has a online shopping platform that presents another advantage over rivals

Complementors: Low pressure

Food co-ops are complements to GreenTree Cooperative since they also offer similar products at comparable prices, thus making the GreenTree Cooperative increasingly profitable.

Porter’s Five Forces in Ric’s Food Center Mt. Pleasant, MI

Ric’s Food Center are traditional full-service grocery stores. Ric’s Food Center is committed to providing quality products, value and a sociable service-oriented experience in shopping.

Potential Rivals: High Pressure

Other grocers may easily penetrate the food retail industry.

Entry barriers are relatively low, since Ric’s Food Center does not have a far-reaching distribution system, an established brand name, or the requisite financial capital to discourage rivals.

Rivalry amongst Established Companies: High Pressure

Presently, there are numerous outlets that are retailing in food products.

The industry’s life cycle is mature.

Buyers Bargaining Power: Low pressure

Individual buyer’s bear minimal pressure.

Suppliers Bargaining Power: Low to Medium pressure

Ric’s Food Center holds a sizeable portion of the market share in the neighborhoods it operates in. This presents Ric’s Food Center with much influence it has a well established network of local suppliers.

Substitute Products: High Pressure

The substitutes in food products are numerous.

Online shopping presents another alternative to customers, since it is different and the customer may gain a price advantage. This is because the company may not necessarily have a physical store, thus passing savings to consumers.

Complementors: High Pressure

There are no complementors to Ric’s Food Center since the company operates as a family business.

References

Borge, H. (2005). The Manuscript of Risks. New York: Wiley.

Fred, D. (2007). Strategic Management: Cases & Concepts. Princeton, NJ: Princeton U.P.

Hill, W. (2008). International Business: Competition in the Global Marketplace. New York: McGraw-Hill.