Supplier Bargaining Power: High – By having a great deal of raw material available gives the suppliers a big advantage over their competitors. The majority of businesses in the industry have numerous suppliers to choose from so they can make sure that what they are getting is the best material for a cost effective price. Potential New Entrants: Medium - The possibility of having new clients that will enter the market is pretty low due to the fact that the big businesses are already in existence in the market. It isn’t likely that a loyal customer of the big company will switch to new the company. They will need to create a completely new product that has a better design and quality as well as a better price.
Breakeven analysis is very useful as well as it is easy to change the graph in accordance to different factors. For example as Organic hampers is set at £40 less than their closest rivals it can easily see how many it would have to sell to break even if they were to raise the price. Although this may reduce their competitiveness, they would only have to sell 100 hampers at £100 each. This means the breakeven point has half. With this knowledge Organic hampers would be able to choose a competitive and realistic pricing strategy based on the ability to break even.
There was not one dominant player within the industry; they were more equally balanced thus increasing rivalry. The High fixed cost for running a discount store resulted in an economies of scale effect, this can be seen when Wal-Mart decided to gain economies of scale by building their own distribution centres to add value. Going public in order to finance the extra storage was important for Wal-Mart to utilise capacity as efficiently as possible, they did this by creating distribution hub around 15-20 stores. The increased rivalry continues, this was due to the low levels of product differentiation and little in the way of own branding, products were standard in nature through all discount stores. Also the low switching cost and consumer awareness of shopping around to find the best bargains increased competition around stores to capture customers.
. What is your estimate of the value of Eskimo Pie Corporation as a stand-alone company? In my opinion, Goldman’s estimate of Eskimo Pie’s worth as a stand-alone company was a bit too low. Although they did include somewhat of a premium over Eskimo’s 1990 sales ($47 million in sales versus $57 estimated worth), I still think that it is worth more than that, for a couple reasons. First, I think that Eskimo Pie’s market share and market presence commands a higher price than what Goldman estimated.
First of all, private labels provide more profit from margins to retailers, meaning sellers want to promote private labels more than others. Next, when private labels have the lower price than others, most customers absolutely choose the lower one because the quality is not so much different, and it is also cheaper. Third, coupon promotions normally are great, and a lot of companies use it. But, the coin has two sides, meaning there is a negative aspect as well. 3.
(Primark 2011)Their target consumers are who believe in fast fashion. Primark completion with M&S and ASDA who are placed above it and New look below it as its biggest rival. Primark produces fast fashion it only takes them 6 weeks to convert fashion catwalks into the hands of their customers. It is said that Primark Quality of the products is not great but its value for money. The most attractive strategy of Primark is about cost cutting strategy is by cutting cost of the volume of the turnover meaning the company can negotiate cheap price from its manufactures in China and East Europe then they take a smaller profit margin per item than some other high street stores (Ergo 2011) see Appendix 1.
They have a good variety of products to shop for. Wal-Mart has many competitors, but one of the strengths that the company has the ability to lower the prices for their customers need. Wal-Mart can be consider a unique store because of one special strategy that they have. The strategy consists of comparing the prices of the other stores, if the other store has an ad of a lower price than Wal-Mart, then they will give it to them to the same price. Many costumers is one of the plus that they give to Wal-Mart because this means that they don’t have to go store by store catching all the specials that they have.
Also their furniture and packaging is designed in such a way that it’s easily transportable (‘flat packaging’1) for both customer and IKEA. The assemble-it-yourself furniture, together with the flat packages, reduced space requirements in logistic operations, which lowered the costs either.2 To maintain their low-cost strategy they have to manage an international low-cost supplier network. By 2004, IKEA’s network of international low-cost suppliers had grown to the point where it had 43 trading service offices in 33 countries.3 By well thought allocation of their warehouses and stores they managed to reduce costs even further. So we can conclude IKEA is capable of sustaining its low costs, by managing, establish and designing its supplier network in such a way that IKEA achieves lowest costs in logistics. Even though they’re capable to establish a low-cost supplier network, IKEA is also capable of designing its furniture in such a way that it “fits the IKEA concept of form, function and price”4, “for example the OGLA chair which initially was made of wood but eventually is made out of hollow composite, to make the chair affordable to most people”5 Also IKEA was capable of recombining their skills to serve the needs of entire families.
Aesthetically they keep cost down by not going overboard with interior design and comparatively have low labor costs. The strongest competitive force is the rivalry among sellers, buyers and suppliers. The possibility of these large wholesale companies being affected by potential new entrants is quite low. Because we are talking about significant amounts of quantities, the wholesale club industry will not be impacted by other industries offering substitute products. I think Supermarkets have a minimal competitive impact because they try to reach a different target market, even though Supermarkets and the wholesale club industry both carry similar products.
It didn’t help that a lot of their online competitors copied BN’s method of buying gemstones from their suppliers for specific purchases. New Entrants: This is a weak force. When looking at the high costs to enter, as well the significant brand loyalties that already exist, the competition for new entrants keeps most new entrants from being successful. Buyers: This is only a moderate force, since jewelry tends to be custom, and therefore, people expect to pay higher prices than they might for other things. Most jewelry stores’ prices aren’t greatly different from others’ and buyers have very little influence on prices due to the high cost of raw materials to make the products.