...disposable income further expand, it would be reasonable to assume, this trend should slightly increase over the next few years generating a steady stream of revenue. This essay would critically discuss and analyze the attractiveness of U.S. supermarket industry based on Porter’s five competitive forces namely the threat of entry, the threat of substitutes, the power of buyers, the power of suppliers and the competitive rivalry. The threat of entry: like any other attractive industry, the U.S. supermarket industry has a high barriers to entry that is the factors that need to overcome by new entrants if they are to compete in the industry. These barriers includes differentiation of products and services, legislation, expected retaliation, scale and experience and so forth. According to Porter, high barriers to entry is an advantage for incumbents relative to new entrants. Example of the actor would be Tesco (U.K.), Carrefour (France). The threat of substitutes: substitutes are products or services that offer similar benefit to the industry’s products or services but by a different process. Managers often focus on their competitors in their industry and ignore the potential threat posed by substitutes. Porter emphasis two important points to bear in mind about substitutes that are the price/performance ratio and the extra-industry effects. Aldi’s U.S. marketing research shows that its unique operating style...
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...1. Porter’s Five Forces Model in USA Supermarket Industry • The Threat of New Entrance (Low) 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 sales data for many suppliers. The market power that Walmarts have, make them very easy to bargain with the supplier, this situation makes it harder for the new entrance to compete with Walmarts. On the other hand, ALDI is considered as a discount grocery chain also has its advantage. ALDI’s unique operating model makes it almost impossible for competitors to match price and quality. Max Levitte, CEO cheapism.com, wrote that one day he visited a store in Ohio and compared ALDI to Kroger and Walmarts, so with the same items in various departments, ALDI was the cheaper for total item in shopping cart, with the gap is more than $13 with Walmarts and more than $21 with Kroger.[3] The bankruptcy case of Kmart in 2002 also strengthen...
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...Wal* Mart Stores, Inc. Case Note Company: Walmart Stores Inc. Industry: Discount Retailing Porters Five Forces Key Issues 1. Sustaining the company’s phenomenal performance ▪ 1993 growth rate: 7-8% – First time under 10% since 1985 ▪ The main issue faced by Glass and Siderquist 2. Expanding stores outside the U.S. ▪ Planning to open several of its retail formats in Mexico ▪ Management concerned about the success of these formats outside the U.S. 3. Increasing value of stock prices ▪ From early March to late April, the stock prices fell 22% to 26% ▪ So many sellers were eagerly trying to sell their stock that the NYSE temporarily halted trading in the stock Suggestions and Recommendations 1. Increase the number supercenter stores ▪ Producing impressive growth—sales in 1992 increased 16% to 11.4 billion, up from $9.8 billion ▪ Leaders in sales of supercenter chains—Meijer and Fred Meyer—were expected to remain regional ▪ Higher profitability potential than supermarkets 2. Evaluate the performance of its retail formats in Mexico ▪ If successful, management will be confident in expanding operations in Mexico as well as other international markets (Thailand, China, Indonesia) 3. Acquire companies such as Family Dollar and Dollar General ▪ According to Investopedia, the key principle behind buying a company is to create shareholder value ...
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...4th Quarter 2010 | 25(4) THEME OVERVIEW: FUNDAMENTAL FORCES AFFECTING AGRIBUSINESS INDUSTRIES Kent Olson and Mike Boehlje JEL Classifications: Q13, L10, L22, M22, L80 Keywords: Agribusiness, Market Forces, Structural Change, Porter’s Five Forces Agribusiness industries are facing numerous challenges and opportunities resulting from various fundamental forces. An understanding of the forces that are shaping and shifting the competitive landscape is useful to not only understand the strategic positioning decisions of the firms in these industries, but also the dramatic structural changes that are occurring in the food production, processing and distribution sector. This series of articles discusses the fundamental forces creating change in the agribusiness industries, and how companies and decision-makers are being affected by, and adapting to, changes in these forces. We frame this discussion using the analytical concepts of value chains and Porter’s Five Forces. We describe the agribusiness value chain as two chains which become one at the consumer end (Figure 1). One value chain follows plants and plant products, and another chain follows animals and animal products. These two chains blend into one chain at the processing and retailing stages of the chain. We also view the value chain rather simply as four stages: (1) input suppliers; (2) producers; (3) processors and handlers; and (4) retailers. While the value chain could be viewed as specific for different products...
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...What is it? Framework/theory Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E Porter of Harvard Business School as a simple framework for assessing and evaluating the competitive strength and position of a business organisation. This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market. Porter’s five forces help to identify where power lies in a business situation. This is useful both in understanding the strength of an organisation’s current competitive position, and the strength of a position that an organisation may look to move into. Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes. Porter’s five forces of competitive position analysis: The five forces are: 1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is driven by the: number of suppliers of each essential input; uniqueness of their product or service; relative size and strength of the supplier; and cost of switching from one supplier to another. 2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven by the: number of buyers in the market; importance of each individual buyer to the organisation; and cost...
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...managers use social intelligence to define the future of the business, analyzing markets, industries and economies to determine the strategic direction the company must follow to remain unprofitable. True False 6. A variable is a business intelligence characteristic that stands for a value that cannot change over time. True False 7. Companies update business strategies continuously as internal and external environments change. True False 8. For an organization to succeed, every department or functional area must work independently to be most effective. True False 9. Porter's Five Forces Model outlines the process for a sales strategy. True False 10. With the Five Forces Model, companies should watch the forces in the market. If the forces are strong competition generally increases and if the forces are weak competition typically decreases. True False 11. Successful companies today operate cross-functionally, integrating the operations of all departments. True False 12. An overview of systems...
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...Let's look at the competitive forces model specifically as it applies to the company that interest you or pick one of the following companies, such as Google, Ebay, Amazon, Walmart, Apple, Microsoft, Starbucks, AT&T, Coke, Home Depot, Aflac, etc.... For maximum credit for this post, please be sure to address each of the questions below for your selected company 1. Who are their existing competitors? To name a few EBay, Walmart and Alibaba are some of Amazons competitors. 2. Are there any potential new market entrants? Considering the nature of the business there are always potential new market entrants because it is less costly to enter the market and setup operations. Traditional stores can be the biggest threat because they already have the consumer base. For instance Walmart already enjoy economies of scale, they have brands that people recognize and they have a strong supply chain. 3. Are there any substitute products and services? Yes there are a ton of companies that offer some of the same products and service that Amazon offer. 4. Can customers easily switch to a lower cost provider? Yes customers can easily switch to lower cost providers, but most will not because of the customer service provided by Amazon. 5. Who are the suppliers? Amazon.com provides any type of product there is in its online stores. This means that there is a strong supplier base relationship that cannot be replicated. In addition, as...
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...from the vendor to the consumer. As we have learned in class, the channel can be direct, directly from the vendor to the consumer, or there can be intermediaries and several connections, such as wholesaler, distributor, agents, and retailers. The distribution channel is also referred to as the marketing channel. Michael Porter defines competitive advantage as the ability of one firm to outperform its rivals by establishing a difference and preserving it. The results of having an advantage over other firms in the market are more customers which lead to higher sales and more profits. Product offered, firm’s cost structure, consumer support and distribution network are examples of ways in gaining competitive advantage in the market. Rosenbloom define sustainable competitive advantage as “a competitive edge that cannot be quickly or easily copied by competitors. In recent years, it has become far more difficult for companies to attain such an advantage through product, price, and promotion strategies” (Rosenbloom, 2004). Another way for firms to gain competitive advantage is through their distribution channel by using Porter’s Five Forces (rivalry, threat of substitutes, buyer power, supplier power, and threat of new entrants and entry barriers). We will be focusing on strategic alliance and direct channel. Strategic alliance is defined as the relationship created between firms where their knowledge is combined to increase sales and reduce cost of their good and services...
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...publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. ISBN: 978-1-4221-6059-6 By his example, Arthur Rosin, my uncle, taught me the pleasures of understanding and explaining. This book is dedicated to him, to Betty Rosin, and to my parents, Cyrille and Eugene Gorin. Contents Copyright Acknowledgments Introduction Part One: What Is Competition? 1. Competition: The Right Mind-Set 2. The Five Forces: Competing for Profits 3. Competitive Advantage: The Value Chain and Your P&L Part Two: What Is Strategy? 4. Creating Value: The Core 5. Trade-offs: The Linchpin 6. Fit: The Amplifier 7. Continuity: The Enabler Epilogue: A Short List of Implications FAQs: An Interview with Michael Porter A Porter Glossary: Key Concepts Chapter Notes and Sources About the Author Acknowledgments The Michael Porter I know is first and foremost a gifted teacher. If this book succeeds in helping readers understand Porter’s ideas in their full richness, it is thanks in large measure to his encouragement, his guidance, and his patience in explaining those ideas to me. As this book progressed, he carefully reviewed every chapter, giving generously both his time and his laser-sharp attention. The company examples I have used to illustrate Porter’s ideas draw not only on his work, but also on that of many researchers and business writers. Where I have...
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...1) What are the three parts of sustainability? Social Environment Economic 2) What did Michael Porter come up with? A)Reinnovation B) The Five Forces concept C) sustainability 1) Which country was used as a subject to test the potential benefits from entrepreneurship and innovation in developing countries? (a) Haiti (b) Uganda (c) Ghana (d) Latvia 2) According to the article pertaining to innovation in developing nations, there is a positive relationship between ___________ and __________. (a) education, rate of income (b) cultural barriers, economic development (c) firm size, innovation 3) T/F As a benefit of service innovation, it is believed that users have valid, innovative, useful, and creative ideas. True A unique approach to innovations produces _______ innovation verse a typical strategy that produces ________ innovation. a) radical/incremental b) greater/less c)less/greater d) incremental/radical What is not one of Porters 5 forces for competitive strategy? a) Rivalry b) Substitutes c) Consumer power d) Barriers and entry 1. The adoption of a radical process innovation is significantly promoted THE MOST by: A. Large company size B. The presence of a champion C. Technology policies D. Sustainability Answer: B 2. Which of the following factors DOES NOT impact how well a company innovates? A. Company size B. Level of education C. Race D. Amount of resources Answer: C What factor could influence...
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...Contents Company Background 3 Vision & Mission Statement 3 Industry Analysis 4 Competitive Analysis 5 Financial Analysis 6 SWOT & QSPM Analysis 6 Strategy Recommendation 7 Action Plan 9 Conclusion 10 Appendix One- External Factor Evaluation Matrix for Walmart 11 Appendix Two- Internal Factor Evaluation Matrix for Walmart 12 Appendix Three- Walmart’s Competitive Profile Matrix (CPM) 13 Appendix Four- Financial Ratios 2010 Fiscal Year 14 Appendix Five- Walmart SWOT Matrix 15 Appendix Six- Porter Five Forces Model 16 Appendix Seven-Action Plan 17 References 18 Company Background Wal-Mart was founded in 1962 by Sam Walton with the first store opening in Rogers, Arkansas. Incorporated on October 31, 1969 and became publicly traded in 1972. What Sam Walton set out to accomplish when opening the first Wal-Mart store in 1962 was to save people money and to help them live better. Wal-Mart serves customers more than 200 million times per week at over 9,800 retail outlets located in 28 countries (Walmart, 2011). Retail outlets offer a wide variety of products, with stores having over 30 departments of general merchandise and full service grocery outlets. This has made Wal-Mart a leader in the general merchandise industry as well as a top competitor in the grocery industry. Vision & Mission Statement The mission statement of Wal-Mart reflects...
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...operations. Simply by wanting to achieve higher profit than the average competitor in the product market (Porter,1980).Companies seek to use their understanding to outline their market offers to deliver more value to the customers. They do so by applying competitive strategy; which according to Porter (1980) is the search to find a favorable competitive position in an industry. It aims is to establish profitable and sustainable position against the forces that determine industry competition. Therefore competitive strategy is about beating the competition. To achieve such goals Michael Porter and other advocates such as Mintzberg, McGee and Bowman suggested few market positioning approaches and models. The three main approaches are Porter Generic Competitive Strategies, Mintzberg market positioning and customer matrix. To add up, models such as product life cycle, Porter Five forces model, Strategic Grouping and Scenario planning also help to formulate the competitive strategy of a business. Porters Five forces model is the key influence to other models. This model determines industry profitability because it influences the price, cost and return on investment. Porter believes that the five forces is more than just competing with direct competitors but also fighting for profits. In any industry no matter what it produces whether product or service of any type, there are five bases of competition at work. For instance take an airline industry the level of rivals is high as the other...
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...>technicalmatters Business strategy India’s cultural and linguistic diversity make the country unique in many ways, so can general management theories be tailored to suit Indian business? I decided to apply the famous “five forces” model, which was designed by Michael Porter, professor of strategy and competitiveness at Harvard University, to give a company insights into the potential profitability of a market and help it form its strategy accordingly. The first force covered by the analysis framework is the threat of new competition. Unless the barriers to your market are formidable, new players can enter and poach your share of it. If you wish to enter a new market, you want these barriers to be low, of course. If Porter were Indian, he would recognise that factors such as state protectionism and a lack of infrastructure are a greater barrier to entry in India than they are in more developed nations, where market forces are more powerful. This is because governments of emerging economies are usually reluctant to open the doors to new players in many sectors. Even if they do, it’s likely that they will adopt more interventionist policies at a later stage. For example, India’s airline sector is poised for growth, but the fact that it has recently been deregulated makes it more difficult for competitors to develop long-term strategies, because all such strategies will collapse if the government feels that new entrants are threatening its home market. One factor that could play...
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...organization should welcome this type of emergent strategies, which may be in a form of feedback or new ideas. Executing an organization's global plan once the vision is established will always come with a challenge. In the 21st century, this challenge is even more intensified, because in the era of globalization, the competition is not just statewide and nationwide, but worldwide. Nations around the world and especially emerging nations have learned that capitalist market is the path to prosperity for its society and have adopted the western approach of intense competition where the strong and efficient will survive. A management team within an organization ultimately makes decisions that are influenced by what Michael Porter describes as Porter's Five Forces: supplier power, buyer power, threat of new entrants, threat of substitutes, and degree of...
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...Global marketing – strategic principles Strategic principles are the essence of marketing, becouse it is responsible for successfully relating the strenghts of an organization to its enviroment. The way you can gain insight competitors is trough industry analysis. We can define industry as a group of firms that produce products that are close substitutes for each other. Michael E. Porter developed a five forces model that explains competition in an industry: - The threat of new entrants - The threat of substitute products or services - The bargaining power of buyers - The bargaining power of suppliers - The competitive rivalry among current members of the industry Threat of new entrants New entrants to an industry bring new capacity, desire to get position and market share, also sometimes new approaches to serving customer needs. Porter describes eight major sources of barriers to entry, the presence or abcsence of which determines the extent of threat of new industry entrants. Product differentiation can be achived as a result of unique product attributes or effective marketing communications, the third entery barrier relates to capital requirements, a fourth would be switching costs which is caused by the need to change suppliers and products. Now we come to the fifth barrier to entry that is refered to distribution channels, sixth apears as government policy. Some established firms may come acros enjoying costs advantages...
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