Question

Choose an industry.

Create a five forces model for that industry that includes each of the following:

·       A score for each force (high, medium, low)

·       Overall attractiveness of the industry (high, medium, low)

·       Justification of the rating

Complete the Five Forces Model Worksheet.

Answer 1

PORTER’s five forces – Supermarket industry USA

Industry selected: Supermarket Industry

Overall attractiveness of the industry: high

Threat of new entrants: Medium

Threat of Substitutes: Medium

Bargaining power of suppliers: low

Bargaining power of customers: Medium

Intensity of competition rivalry: high

Threat of New entrants: Medium

1. Cost of investment is moderate to high which is affordable by many.
2. A lot of established supermarkets in the USA have private labeled products which are difficult for newcomers to copy.
3. Government regulations related to the supermarket is not rigid.
4. Products sold are almost the same.
5. Discounts and other promotions provided by other supermarkets are due to economies of scale and best supply chain management practices followed.

Threat of Substitutes: Medium

1. The substitutes to supermarkets are the apps and other E-commerce sites that delivers groceries to home directly. Inventory-led model is followed by E-commerce companies that reduce the dependency on supermarkets.
2. Substitutes provide additional services and sometimes provide plenty of discounts.
3. Quality provided by substitutes is not reliable all the time.
4. Substitutes are competent enough to provide the products aa t lower price.

Bargaining Power of Suppliers: Low

1. Suppliers of groceries are increasing and competition exists between them.
2. Suppliers stop their supply during a certain season.
3. Suppliers are ready to provide their goods at competent prices.

Bargaining power of customers: Medium

1. Customers expect good quality from supermarkets
2. Customers can switch to another supermarket based on offers, cost, quality and proximity from their location.
3. Different segment of customers is present in the USA.

Intensity of competition rivalry: high

1. There are many supermarket chains present in the USA.
2. Retail firms compete with each other by optimizing their operations and supply chain, discounts, increasing the economies of scale operation, etc.
3. Retail firms are strategic enough and trying to expand by increasing their number of stores.