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.
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.
Substitute Products The threat of substitute products is very weak in the jewelry industry. Substitute performance features are extremely lackluster at this point, especially in the high-end markets. The switching costs to substitutes can also be very large, limiting their viability, along with the negative social stigma that comes with owning a “fake” item. In the diamond market, large diamond miners have bought up most of these artificial producers and then limited the availability of their products. Supplier Bargaining Power Supplier bargaining power is moderate for the online jewelers.
The spread of the share of the market is pretty much dominated by Sam’s Club and Costco; 36% and 56% respectively. The competition is there, but not between each other. While the Wholesale clubs have lower prices and larger quantities, they lack in other areas which sometimes drive consumers away from them and towards other stores such as Wal-Mart, Best Buy, and other such retailers. But some of those things that scare away the consumer from Wholesale clubs, attract other kinds of consumers, which then deter them from shopping at the non-wholesale clubs. I would personally say that, of the five forces, the substitution from other industries would be the strongest.
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.
In this case, Blue Nile had to compete with online and offline traders. The recession hit the jewelry business real hard but Blue Niles business model kept them functioning through the hard times. In addition, many of the online retailers employed Blue Niles business model purchasing stones from suppliers only when an order for a specific stone was received and quick delivery when purchased. Suppliers: Supplier bargaining power is weak in this industry. Blue Niles economical supply chain and comparatively low operating costs allowed it to sell comparable-quality jewelry at substantially lower prices than the leading competitor.
J&J has a strong economy of scale. J&J’s cost efficient production facilities act as deterrents to new entrants looking to enter our consumer segment industry. New entrants are deterred by the amount of capital needed to build new factories capable of mass production. Confronted by J&J’s economy of scale, new entrants are relegated to seek niche market segments. Niche markets can allow for higher margins; however new entrants effectively position their product to a low volume high price model limiting their sales volume.
Listo System is finding hard to differentiate itself in product and price from its competitors Power Shift to Buyer During 1990s, Listo was a great success. Listo inabilities to differentiate itself from the competitors jeopardize that success. If Listo had been able to differentiate and create competitive advantage, it would have created loyal customers and strong brand image. Creating loyal customers and strong brand image would help to keep bargain power to the seller. However, inability of Listo to differentiate shifts the bargaining power to Buyer.
And as well, it was very difficult from financial perspective due to financial crisis, when banks were not giving out loans and funds for every single company. Later on, Graham wanted integrate with Logoplaste to become top three players in the industry. About six times larger in revenue and with eighty arranged plants, Graham could push Logoplaste to the new
Even though the industry is concentrated, this is a highly competitive industry and the demand is trivial. For example, if Coke raises prices over Pepsi, they will lose a lot of sales. Therefore, I would say the bottling companies have little bargaining power. The fourth force is the bargaining power of the buyers. There are two factors determining the power of the buyers: price sensitivity and bargaining power.