What are Micro Blogs ? – All about Micro Blogs
You must have heard it from one and all that no Company has a choice when it comes to being present and marketing through Social Media Channels. Understanding of the various media channels, their capabilities, the kind of audience and community that participates in a particular platform helps in designing or choosing the right mix […]
Role of Communication in Sales Management
Sales Management refers to the art of achieving the sales targets within the stipulated time frame through effective budgeting and meticulous planning. Sales management enables the sales representatives to close sales deals in favour of the organization and eventually earn revenues for the same. Communication plays an important role in sales management. Sales professionals need […]
Methods of Measuring Customer Satisfaction
Managing customers’ satisfaction efficiently is one the biggest challenge an organization face. The tools or methods to measure customer satisfaction needs to be defined sophisticatedly to fulfill the desired norms. There are following methods to measure customer satisfaction: Direct Methods: Directly contacting customers and getting their valuable feedback is very important. Following are some of […]
Role of User-Generated Content in Social Media Strategies
When it comes to social media strategy, user-generated content is one of the most impactful techniques you can use to connect with your audience. In general, people hate feeling like they are being sold to. However, if a friend or trusted source tells them about a new product they’re obsessed with, people are much more […]
Factors Affecting Buying Decision of the Customers at the Store
There are several factors which affect the buying decision of the customers. Let us go through them one by one: Store Display and Presentation of Products The store display plays an important role in influencing the buying decision of the customers. It is the display of the store which attracts passing individuals into the store. […]
Michael Porter’s Five Forces Model helps in the determination of the industry attractiveness and in analyzing the prospects of growth and opportunities by assessing the competitive trends and the intensity of the rivalry amongst the existing competitors. It is a major strategic tool used for determining the industry potential/prospects and the possible threats which may limit the attractiveness of this industry and prevent new entrants from joining the competitive battle. It provides key insights to the organizations for crafting and implementing both long-term and short-term strategic plans.
The Five forces are Threat from the Competitors, Threat from the Substitutes, Buyer Bargaining Strength, Supplier Bargaining Power and the Intensity of the Competitive Rivalry. Let’s analyze each of these forces from a retail industry perspective:
This is one of the key factors which will ultimately be deciding the attractiveness of the retail industry. New entrants will be able to learn from the mistakes of the existing players and may join the industry with improved strategies or corrective measures. The new entrants can offer low-cost offerings with improved features for luring the customers.
The competition in the retail industry is quite fierce and intense. As a result of this, the existing players may impose barriers to entry in the industry for the new players. These barriers can be imposed by strengthening the distribution infrastructure and the supply chain framework. Barriers for the new entrants can also be imposed by gaining a cost advantage or low-cost leadership and also in the form of economic regulations or trade barriers for foreign players. Apart from this, the threat to the entry of new players could be from the differentiation of the product, capital investment strength and strong loyalty of the customers for the existing players.
The existence of substitutes will definitely affect the attractiveness of the industry and lower the profitability. This is because substitutes directly influence the prices of the products and the demand for the products from the customers as well. In the retail industry, the threat from the substitutes is very high. With the availability of more substitute products, the buyers will get more options to choose from the available alternatives for satisfying their requirements. The willingness of the buyers to buy the substitute products is directly dependent upon various factors such as quality, prices and the performance of the substitute products.
If we analyze the retail industry, various factors such as availability of alternative options for buying like online shopping, different modes of payment, availability of home delivery service, and cost of the substitute products can intensify the threats from the substitutes.
Buyers are the firms or the individuals who are the ultimate purchasers of the industry products and services. Buyers include the end consumers, distributors, retailers and the industrial purchasers.
A buyer’s bargaining power is expected to be higher if the scope for switching from one supplier to another exists. Moreover, if concentrated numbers of buyers purchase a large quantity of products, then the bargaining power of the buyers is expected to be higher. Apart from this, the industry bargaining power will be expected to be high for those products for which quality is given utmost importance.
Therefore, in case of the retail industry, the bargaining power of the buyers is expected to be very high because of the easy availability of plenty of substitutes with better price offerings, volumes purchased by the buyers, sensitivity towards the pricing/cost related factors and poor loyalty towards the brand.
Suppliers supply the required raw materials or the inputs to the industry players. These inputs can be in the form of man, material, finance or technology related support from the suppliers. Various factors determine the bargaining power of the suppliers. The suppliers bargaining power is expected to be high if the quality of the raw material or the inputs are unique. The factors which govern the strength of the bargaining power of the suppliers are the uniqueness of the inputs or the raw materials, the quality of the product which is offered by the suppliers and more demand for the supplier’s products will increase the bargaining power of the suppliers.
The higher the intensity of the competitive rivalry in the industry, the lesser will be the profitability of the firms. In the retail industry, the intensity of competitive rivalry is affected by a gamut of factors such as:
The other crucial factors which determine the intensity of the competitive rivalry are the pricing of the products, service quality, strategic alliances as mergers/acquisitions, etc. High competitive rivalry can be regarded as a threat because it weakens the profit prospects and the prices. On the other hand, low competitive rivalry can be viewed as an opportunity because this will open new avenues for maximizing profits for the firms.
To sum up, retail industry globally has been witnessing a paradigm shift since last few years. The industry is faced with cut-throat competition and is still ruled by unorganized players though the organized retail sector has shown an incredible performance. Various factors such as entry barriers, bargaining power of the buyers/suppliers, the intensity of competition and economies of scale should be taken into consideration by the retailers and work towards them for enjoying economies in scale and achieving a competitive edge in the industry.
Your email address will not be published. Required fields are marked *
