Porter’s Five Forces Model in the Sports Industry
This is a discussion of the Porter’s Five Forces model in the retail industry. In this discussion, three companies have been chosen: Walmart, K-mart, and Target.
Walmart
Walmart has operated a retail chain of stores. It is also present online. Walmart operates subsidiaries within US and outside USA market (Walmart, 2016).
Walmart Porter’s Five Forces Model
Threats of New Entrants-High: It is easy for new entrants to join the competition because the cost of setting up a retail store is not very high. Even small new entrants can join the market on the basis of factors such as convenience and customer service. Can implement cost advantage to compete with retailers.
Bargaining Power of Buyers-Low. There is a large population of buyers compared to the number of retail stores in the market. Buyers are also diverse and their purchases are small. They cannot therefore exert a force on Walmart.
Bargaining Power of Suppliers-Low. There are many suppliers in the retail industry and most of them depend on the retail stores like Walmart to thrive. Walmart can switch from supplier to supplier depending factors like costs, quality, and convenience.
Threats of Substitutes-Low. Walmart retail stores stock a wide variety of goods that customers can buy. They stock almost any product in the market. Even if customers ere to look for substitutes outside Walmart stores they might find the substitutes are costly.
Rivalry Among Existing Competitors-High. There is intense rivalry among the competitors in the retail store industry. It involves many firms of various sizes competing for customers. Apart from the big retail chains, there are also smaller retailers. Further the competitors are very aggressive in their marketing.
Kmart
Kmart is a subsidiary of Sears Holding Corporation and operates a chain of stores (Sears Holdings, 2016).
Threats of New Entrants-Low: Capital cost of setting up equivalent chains of retail stores is very high. Setting up reliable supplier base and logistics hard.
Bargaining Power of Buyers-High. There are many retail stores and some operating online. Kmart brand has had brand challenges.
Bargaining Power of Suppliers-fair. There are many suppliers in the retail industry and some have their independent stores in convenient locations. Suppliers sell products to many stores and other retailers. Due to payment problems, supplier power is fair.
Threats of Substitutes-Low. Buyers can opt to go buy items in smaller size retailers rather than go to Kmart stores which stock everything. On the other hand buyers might want to buy a lot of goods where all of them are stocked in one building. Threat of substitute is low.
Rivalry Among Existing Competitors-High. The competition in the retail industry is intense. There are other retailers which stock the same goods and offer similar services.
Target
Threats of New Entrants-Moderate: Setting up and running a retail chain of stores requires heavy capital commitment. Efficient management of supplier logistics and distribution very involving for new entrants. Target is a strong brand.
Bargaining Power of Buyers-High. Target market is quite sophisticated and the bargaining power is high. Buyers have many alternatives to choose from including target’s competitors.
Bargaining Power of Suppliers-Low. Target can access goods from many suppliers competing on their own to secure business with Target. Target can switch suppliers on grounds of prices, quality, and reliability.
Threats of Substitutes-Low. There are not many retail stores equivalent to Target. However, buyers can shop in smaller retail stores for specific items. But Target operates online stores where buyers can go to specific items.
Rivalry Among Existing Competitors-High. Competition among retailers very high. Both big retail stores and smaller ones competing for buyers.
Competitive Advantages and Distinctive Competencies
All the three brands: Walmart, Target, and Kmart have strong brand names. They have all matured. Walmart has many subsidiaries and a huge capital base. It can afford to reduce prices to the disadvantage of the other major retail chains. The three companies have also invested in online presence to enhance their competitive advantage. Kmart operates under Sears Holdings and it can be cushioned in case it faces financial challenges. Target is second largest after Walmart and it can use the cost advantage as a competitive strategy against threats of new entrants.
References
Sears Holdings (2016). About Kmart. Retrieved from: About Kmart
Walmart. (2016). Walmart History and Mission. Retrieved from: http://help.walmart.com/app/answers/detail/a_id/6
