Power of Suppliers – Low There is low supplier concentration relative to the industry they sell to and a single supplier does not account for a large part of a retailer’s business. This weakens the overall power of the supplier because there are more supply options available for discount retailers. The emergence of private labels has also reduced supplier leverage. Supplier power is further weakened by low switching costs and non-differentiated products. As the retailers incur virtually no costs by changing suppliers it is easy for them to play them against each other to get better terms.
I would personally say that, of the five forces, the substitution from other industries would be the strongest. Wholesale clubs offer similar products in a sense, although it is the same product simply in larger quantities, or obviously, wholesale instead, which drives the price down. Which then could almost tie up with the buyers competitive force, which is where the wholesale clubs buy their products from, direct, which makes that middle man non-existent, and increases profit margins. 2. Do all three warehouse club rivals have highly similar strategies?
Blue Nile, Inc. (Case Study) Submitted by A-Game 1. Five Forces Analysis Overall, the competitive forces on the industry are only moderately strong with rivalry competition having the biggest impact. The five forces are looked at individually below. Buyer Bargaining Power Buyer bargaining power is low, but growing in the online jewelry retail industry. The increasing power stems from the buyer’s switching costs to competing brands being extremely low.
1. The strategy of DFA company was taking advantages of size effect (small companies outperform the market) and value effect (high book-to-market ratio companies outperform the market). So that they chose small-capital companies and high book value companies to create their portfolio. They primarily believed in efficient market as well as the sound academic researches and ability of skilled trader. They worked with the RIAs (registered investment advisors) to lower the cost.
Such quantities means Hershey must have very reliable logistics systems. So, the senior management decided to implement the ERP systems gradually. The common advantages of implementing the ERP system in a conventional business scenario are: a) Integration Project Integration can be the most beneficial outcome of the ERP Implementation. Hershey is aiming for implementing ERP for reducing data redundancy and redundant data entry thus by strengthening the system integration. ERP does not improve the individual efficiency of users, so if they expect it, it will be a big disappointment.
The company is over-liquid and has no debt, from which the shareholders are suffering because all acquisitions and investments are with high costs and low risks. BKI needs to create leverage by borrowing more, thus increase its ROI and ROE of its acquisitions and investments. At the moment Blain shows the lowest ROE in its sector (by far) while increasing its cost of capital, in other words the cash held remains unutilized and thus reduces the value of the company. Companies with low ROE are less attractive to investors. On the other hand, debt has a much lower cost of capita and provides a good opportunity to take on more
These lead firms to use whatever resource they have as weapon to gain competitive advantage. If you at the rivalry in the online DVD rental industry, you see that it is high. Rivals in this industry carry a feebly differentiated product, which intensifies threats from rivals. In this industry, the cost to switch or change suppliers is very low; making it easier for consumers to have less brand loyalty. They can switch wherever there is a lower cost being offered.
As we all know Wal-Mart`s strategy to win against its competitors is its offered prices. The company is considered leader in the market because it has the capability to offer the lowest prices for this reason Wal-Mart is considered to have a large negotiating power. They can negotiate with suppliers to drop prices and consequently lower prices. In my opinion NAFTA benefits plus Wal-Mart`s purchasing power was the combination that allowed the company to be successful. Wal-Mart uses time inventory system which allows them to keep track of what they need
By driving down the costs from their suppliers and overhead as much as possible, it resulted in some of the lowest prices possible for consumers, in which they kept at low prices all the time, as opposed to constant fluxuating prices with sales and promotions. All of these competitive advantages can be seen as reasons for Wal-Mart’s success in North America, particularly the US. This success model however cannot carry over into foreign markets without changes. There are many intervening factors that also should be taken into effect, such as laws and culture in foreign markets that can prove as large barriers for this same business plan, particularly in China. I believe Wal-Mart is not having the success it hoped for and expected in China because they got focused on the enormous market size, and lacked research into the market structure prior to market entry.
The primary cost advantage is Wal-Mart’s superior distribution capability (location of stores, inside-out growth patterns, cross-docking, superior information management). Wal-Mart’s prices are low by the industry standard, which, combined with its lower costs, indicates a strategy that aims at growth in volume through grabbing increased market share. Low prices, advanced data management and extremely motivated employees (“10 ft rule”, “sundown rule”) means a better customer experience than at other discount retailers, even though Wal-Mart remains a self-service retailer. In addition, the large size of the traditional Wal-Mart stores adds convenience by offering a one-stop solution by offering a wide range of products. It’s worth mentioning that Wal-Mart acquired volume through a careful consideration of locations, away from competition.