...Bargaining power of suppliers The airline suppliers are mainly aircraft manufacturers, labour, fuel companies and there isn’t a lot of cutthroat competition among suppliers. Also, the likelihood of a supplier integrating vertical is rare. They have high bargaining power, since there is limited number of suppliers; companies have to use fuel and there is no substitute currently. Also, airlines will choose a trustworthy supplier, which means the scope of suppliers will be narrowed down to fewer choices. There are only 2 producers Boeing and Airbus- Market for production of planes is a duopoly therefore the bargaining power of suppliers is very high. This means that these companies have been charging very high prices for their planes to all airline companies. Being and Airbus can obtain raw materials and components from competitive supplier markets. However, most parts suppliers do more business selling replacement parts to airlines than selling original equipment to Boeing and Airbus, so the airframe makers do not have an iron grip on their suppliers. When the airline industry does well and orders more planes from Airbus and Boeing, parts suppliers can negotiate more favourable supplier contracts for themselves. All airlines employ various subcontractors around the world to complete parts of production which will be finally assembled at their assembly plants. But the usage of rare resources such as carbon-fibre and requirement for specialized facilities for production has shifted...
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...Bargaining power of supplier Bargaining power of supplier is also known as the amount of control your suppliers have over the price of goods you purchase dictates whether this area is an opportunity or threat. This is driven by the number of suppliers of each essential input; uniqueness of their product or service; relative size and strength of the supplier, and cost of switching from one supplier to another. In this case, Minbaochong Sdn Bhd is the supplier of Eight Eleven, the largest chain of twenty-four hour grocery stores in Malaysia. MinBao brand is one of the most popular brands of bread in Malaysia which supposed to give Minbaochong Sdn Bhd a strong bargaining power. However the tremendous mistake made by Kelvin Tan, the sales manager of Minbaochong Sdn Bhd, closed a deal with Eight Eleven by offering them a price concession and allowing them to offer a 400 gram loaf of MinBao bread for RM3.00 instead of its recommended retail price of RM3.20. This strategy causes sales of MinBao bread in supermarkets and other outlets declined significantly and resulted Eight Eleven is now accounted for one-third of Minbaochong’s sales. Further, the company already burdened by debt acquired in its recent spin off was on the edge of bankruptcy lower the bargaining power of Minbaochong Sdn Bhd. The bargaining power is now with Eight Eleven as Eight Eleven controlling one-third of Minbaochong’s sales and even Minbaochong Sdn Bhd terminate the contract and stop supplying bread to Eight...
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...Porter’s Five Forces Bargaining Power of Suppliers. The ability of a firm to negotiate good terms is influenced by the number of firms a company relies on. Apple has a high bargaining power over their suppliers because they are able to outsource much of their manufacturing and they also have been able produce some of their own supplies, which has allowed Apple a great advantage in the competitive market. Bargaining power of buyers is the next force which a firm is reliant on customers. There is a very high demand currently for Apple products and what gives them a great advantage is that customers see them as a unique product, where the substitutes, for instance, Dell, HP, IBM, etc just do not compare. The iPod and iPhone Most iPods except for the “Classic,” rely on flash memory instead of a hard drive for storage. The benefits of flash memory are reliability, form factor, and energy consumption. Realizing the significant benefits of flash memory for portable media devices, Apple formed long-term relationships with Samsung, Intel, and Micron, and by mid-2007 commanded about 25% of worldwide flash production (Apple Inc., 2008, Harvard Business Case). As for the iPad and the tablet market, it turns out that Apple has secured about 60% of global touch panel capacity, with a focus on 10-inch displays. Some have speculated that this has forced some competitors to initially focus on devices with 7-inch screens, such as Samsung with its Galaxy Tab. The effect...
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...Bargaining Powers of the Suppliers: The suppliers of the bank are basically the investors in the bank. Those suppliers of the bank are i. Promoters: They are the pre-investor of the business house. They were the initial investors of the bank. Initially sunrise bank was a private limited bank, during that time promoters had very high bargaining power. In the past it was experienced that the bank had to work in accordance to the promoters. After the bank was open to the general public, the bargaining power of the promoters has diminished. Unlike in the past any actions taken by the promoters are now answerable to the general public. So the few major promoters themselves cannot take decision. So decisions should be taken in consideration of the equity owner of the bank. ii. Shareholders: They are the equity owner of the business. It was in recent times that the bank had opened its ownership to the general public. It was experienced that sunrise bank had the biggest share ratio in terms of capital. At present there are 80,000 shareholders of the bank. It was after the establishment of the bank that it had opened its share to the general public. Now, as the share ratio of sunrise bank is highest compared to other banks, the bargaining power of the shareholder can be taken high. Any decision taken should be approved by shareholders; in this context the bargaining power of the shareholder can be high. There is a provision that the shareholders nominate 2 people as their...
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...Poter’s five forces 1, the bargaining power of suppliers Haidilao Pot has its own four large modern logistics center and a raw material production base, it uses Backward Integration Strategy on its raw material, the company is a large enterprise with national chains in China, the need for raw materials is large, enhance their ability to bargain, recently some vegetables (cabbage, etc. ) oversupply, causing prices to fall, this is good for the company’s business; Shuanghui clenbuterol issue regulations require companies to make safety requirements for food, meat supply is under attack, but also good for the company’s business. It means suppliers has low influence on the company. 2, the bargaining power of buyers Haidilao’s guiding strategy is service differentiation, maximum to meet customers’rationalize requirements. In Haidilao, even waiting for seats can be enjoyable. There are different drinks and kinds of chess on the desk, newest play cards aside and services like nail care for women and shoe care for men available all the time. During dining, you are provided frequently with warm hand towels, a pinafore with ethnic feature, hair string for girls, glass cloth in case that the drop splits to your glasses and a small plastic bag to put your big screen cell phone in. Every waiter and waitress has the right to give you a free meal in particular situation. These uncommon attributes attract more and more interest. On the products, the company will often...
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...Assess how attractive and potentially profitable is an industry Introduction (2) • This is a framework for understanding an industry or an organisation’s position with respect to the forces operating in the microenvironment • It can be used to explain the performance of competitors in a market • From the analysis a number of generic competitive strategies can be derived • Cost leadership • Differentiation • Focus The five forces • The ability of firms to earn an good return depends on five forces: namely the… • Threat of new entrants‐ the ability of new competitors to enter the industry • Bargaining power of suppliers • Bargaining power of customers • Threat of substitute products • Degree of competitive rivalry The five forces framework Threat of Substitute Products Bargaining Power of Suppliers Intensity of rivalry within the industry Bargaining Power of Buyers (Customers) Threat of New Entrants The threat of new entrants Threat of new entrants • If new entrants move into an industry they will gain market share, rivalry will accelerate and profits will decline • If it is difficult to enter an industry the position of existing firms will be strengthened • Impediments to the entry of new firms are known as barriers to entry • If barriers to entry are low then the threat of new entrants will be high, and vice versa Barriers to entry • Capital cost of entry • High cost will deter entry • High capital requirements might mean that only large firms can ...
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...Description of the buying process The buying process consists of stages a buyer passes through in making choices about which products and services to purchase. We are the retailers and we have to consider the all the stages in the buying process in order to purchase the soft drinks in right quantity, right time and place from the supplier. This model is important for anyone who making marketing decisions. It forces the marketer to consider the whole buying process rather than just the purchase decision (when it may be too late for the business to influence the choice). Problem recognition: Perceiving a need The buying process starts with the problem recognition. At this stage, we will recognize a problem or need. In this process, we identify the forecasts and customer orders, checking of the stocks, purchase requisitions from the internal users and requirements such as types of soft drinks, size of soft drinks. Information Search: Seeking Value After we have recognizing those needs, we begin to search for information. Under internal source of information, we request for quotations. It includes the specifications of the items to bind documentation for the suppliers. We also source internally for merchandise plan records, store records and sales person opinion. With the merchandising plan, we can forecast some accuracy what to purchase and when to have it delivered. This will greatly assist us in attaining sales and gross margin goals. We can externally source from customer panels, the...
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...of new entrants to consumer electronics industry is not significant due to cost and financial, knowledge and technological barriers. However, it is important to note that new businesses may overcome these barriers if they are able to introduce new products to the market based on innovative concepts. Large players such as Dell, Apple, HP, Samsung and Acer derive extensive benefits from the economies of scale and this fact represents an additional entry barrier to the consumer electronics industry. Bargaining power of buyers is immense due to the abundancy of offer and little differentiation amongst products. Moreover, there are usually no additional costs for Dell customers to switch to the competition and the majority of customers are well educated about products and services offered by Dell, another important factor that fuels buyer bargaining power. High level of price sensitivity for the type of products and services offered by Dell also increases the bargaining power of buyers. However, inability of backward integration, i.e. producing products offered by Dell by customers, can be specified as an...
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...CHAPTER ONE 1. Introduction to the study The purpose of study is to evaluate the effects of strategic buyer-supplier alliances and partnerships in the South African clothing stores, sector and industry. Strategic Alliances, Partnerships and Joint Ventures involve the establishment of informal and formal relationships with other individuals or businesses to share resources, ideas or capital (Hugo, Badenhorst-Weiss & Biljon 2007). The research indicates that during the past decade, companies in all types of industries and all parts of the world have elected to form strategic alliances and partnerships to complement their own strategic initiatives and strengthen their competitiveness in domestic and international markets (Thompson Jr, Gamble & Strickland, 2006), the statement confirms that some of the companies realize the importance of strategic alliances and partnerships. The current situation in South Africa indicates that the government is imposing Quotas on Chinese imports with intent to influence the South Africa retailers to buy from local suppliers (Sandrey & Fundra, 2008). The quotas have encouraged the major retailers in South Africa to procure more from local suppliers than ever before given the growth in their collective businesses over the last four years. Preliminary investigation between the retailers and clothing manufacturers confirm the retailers’ expectations that local companies will be unable to make up the expected shortfall the quotas will inflict...
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...changes in the environment. The analysis looks at five areas of interest, which are 1) Power of the Buyers; 2) Power of the Suppliers; 3) Threat of Substitute Products; 4) Threat of New Entrants; and 5) Intensity of Rivalry. Notice in the following diagram, how these interact and influence each other. MGMT 488 Chapter 3 – Macro Environment POWER OF BUYERS STRONGER WHEN • • • • • • • • • • Buyers have low switching costs Buyers are large; large volume sales are important Large number of small buyers can band together Buyer demand is weak or declining Buyer demand dramatically slows (aka “a buyer’s market”) Buyer identity is important Quality and quantity of information to buyers is high Buyers can postpone purchase until a later date Product is a commodity Threat of substitute products is high WEAKER WHEN • • • • • • • Buyers purchase infrequently or in small quantities Many buyers Buyer switching costs are high Buyer demand surges (aka “a seller’s market”) Brand reputation is important Highly differentiated product Threat of substitute products is low POWER OF SUPPLIERS STRONGER WHEN • • • • • Industry members have high switching costs Input in short supply Specialized or highly differentiated input Very few suppliers Threat of forward integration by suppliers WEAKER WHEN • • • • • • Commodity input Many suppliers Industry members have low switching...
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...consumers. Internal analysis: Performances: After the new CEO get on the stage, the company starts increase its revenue. Now the company use acquisition strategy to growth. And now they already acquire 2 companies YSL and Sergio Rossi. Current strategies: At the corporate level, the company operates in two directions, which is vertical and horizontal. Horizontally, the company purchased companies in the same industry such as YSL Beaute, Sergio Rossi and YSL couture. This acquisition not only broadens the product lines the company carries; it also provides the company with more specific targets with each of its brands. Vertically, the company has integrated both forward and backwards. It established partnering relationships with some of its suppliers and also tried to gain more control over its DOS (directly operated stores). In integrating vertically, the company is able to more control the entire value adding process, thus able to provide the most value to its customers. Also, they will be able to control costs and the overall image of the brand. Although there are a lot of positive reasons for integration, the company still has to consider factors like management resources and the ability to sustain the profit in the integrated businesses. External analysis: (See appendix 1 for detailed five force analysis) The business environment now is derived by change. Thus the fashion industry also has to adapt to changing consumer needs, change in materials used, and change in the competitive...
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...Micheal Porter projected five forces model in capacity to analyze competitive strategy of the management in any industry. These forces hold an exigent spectrum of importance in the airline industry because of enormous market saturation. The concentration of airline service providers in the market are more than the actual needed demand. Due to immense competition, the level of competition is enhanced within the complex market offering in terms of technology, prices, in-flight entertainment, customer services, and so on. Hence, this paper is presented to analyze the Porter’s five forces model in the horizon of airline industry. Porter has also given the more enhanced framework of forces by including the sixth force as well, which will subsequently be analyzed according to said industry. Porter’s Six Forces Model Analysis The extension of Porter’s five forces model is actually regarded as Porter’s six forces model. The enhanced stimuli of forces did not gain such popularity as that of its previous model integrating five forces only, because of its less positive acceptance. The model is similar to the five forces model with only difference of sixth force in the framework. Hence, all Porter’s (1980) forces are explained below with their certitude rating in the parameters of airline industry. Force 1: Threats of New Entrants The threat of new firm into the same industry is the force which describes the dependability of new entrants on the entering barriers. These barriers...
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...Main Aspects of Porter’s Five Forces Analysis • The rivalry between existing sellers in the market. • The power exerted by the customers in the market. • The impact of the suppliers on the sellers. • The potential threat of new sellers entering the market. • The threat of substitute products becoming available in the market. Understanding the nature of each of these forces gives organizations the necessary insights to enable them to formulate the appropriate strategies to be successful in their market (Thurlby, 1998). Force 1: The Degree of Rivalry The intensity of rivalry, which is the most obvious of the five forces in an industry, helps determine the extent to which the value created by an industry will be dissipated through head-to-head competition. The most valuable contribution of Porter's “five forces” framework in this issue may be its suggestion that rivalry, while important, is only one of several forces that determine industry attractiveness. • This force is located at the centre of the diagram; • Is most likely to be high in those industries where there is a threat of substitute products; and existing power of suppliers and buyers in the market. Force 2: The Threat of Entry Both potential and existing competitors influence average industry profitability. The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for...
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... Bargaining power of suppliers was very low for concentrate producers while the threat of substitute products is very high. The main inputs for Coke and Pepsi products were sugar (sweetener) and packaging. Both had very low bargaining power due to the large number of suppliers in the industry. Concentrate producers (CPs) negotiated directly with sweetener and packaging suppliers. This was done to ensure that prices were low, delivery was faster and the supply was reliable. There were many different suppliers of sugar in the open market. This meant that Coke and Pepsi could purchase sugar from suppliers who were offering sugar at lower prices. When sugar prices were high, however, like it was in the 1980s, the companies easily switched to corn syrup. Because the companies could choose between purchasing sugar and corn syrup, suppliers of nutritive sweeteners did not have much bargaining power. The fact that more suppliers were entering also made it difficult for suppliers to gain bargaining power. One example was Holland Sweetener, which became a supplier after NutraSweet came off patent in 1992. This reduced Searle’s bargaining power and lowered the price of aspartame. Coke and Pepsi are one of the largest customers of the metal can industry. Suppliers did not have bargaining power for two reasons: first, Coke and Pepsi had good relationships with a number of suppliers. This meant that they could purchase metal cans from more than one supplier – and could decide...
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...of the food Retail Industry 1. Supplier Power bargaining power of Suppliers is low. There is a high competition between suppliers which means that their ability to raise prices or reduce quantity is very low. Suppliers include both domestic and international manufacturers and because many retail products are standardized, retailers have low switching costs which make the supplier power low. Larger retailers have power over their suppliers because they can threaten suppliers to change to different suppliers which would significantly hurt the suppliers because of their great market share. Furthermore larger retailers can vertically integrate with suppliers they are having trouble cooperating with. 2. Bargaining Power of Buyers bargaining power of buyers is relatively low. This is because since there are so many customers, no one customer will have bargaining leverage. If consumers choose not to shop at a retail outlet they most likely miss out on value or price as well as convenience of shopping retail. 3. Competitive Rivalry Competitive rivalry is medium to high. There are numerous competitors as well as many retailers that are entering the market rapidly. Several Rivals are highly dedicated to being industry leaders. Furthermore there are diverse approaches and differing goals between competitors. Therefore weak firms are more likely to leave the market which in turn, increases profits for remaining firms which weakens the power of competitive rivalry. 4. Threat...
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