Free Essay

Bargaining Power of Buyers

In: Business and Management

Submitted By peijing
Words 4404
Pages 18
1.1 Executive Summary
Green Paradise Budget Hotel operates in 90, JalanPetaling, 50000, Kuala Lumpur. As a new entrant in budget hotel industry, Green Paradise is selling its brand new Go Green Concept to the customer. Customer can gain new experience and enjoy affordable price in Green Paradise Budget Hotel.
In the first year, Green Paradise may suffer loss for the budget hotel’s expenses. Green Paradise Budget Hotel will gain back net profile of RM 200,000 in the second year. Green Paradise Budget Hotel estimated to be at least 15% net profit and revenue increase in the following years.
Green Paradise Budget Hotel will develop some marketing strategies to gain the sales target. First of all, the company will advertise through newspaper, social networks such as Facebook and Twitter to raise the popularity and sales. The company website will also be created for customer convenience. The customer can check the rate of room through the website and others related information. The company will gain customer loyalty and satisfaction.
Green Paradise Budget Hotel is limited company owned by 5 persons. They are Chia Pei Jing, Choo Yee Ying, Tan Chu Xin, Lim Shee Wei and Chai TeikJian. The company will apply RM 350 000 business loan from bank for the financial sources of the company. The 60% of the capital will be used for buying equipment, renovation, facilities and others. Besides, 40% of the capital will be used for the marketing expenses and also to run the company daily activities.

1.2 Company and Business Description
Green Paradise Budget Hotel is a modern budget hotel which is located at the famous street of Kuala Lumpur, which is the Petaling Street. The hotel mainly implies the ‘Go Green” concept by using recyclable materials throughout the whole hotel. By implying this concept, this budget hotel is capable of providing the customers a low budget yet modern and comfortable hotel rooms for them to stay in it. Furthermore, this budget hotel is also taking the social responsibility to protect the environment and encouraging the customers to have an awareness to save our mother earth. The company core competency is the “Green Reward System”. This system is use to provide different rewards to the customers if they show their supports toward this “Go Green” concept. For an example, if the customers are able to divide their rubbish or waste materials into the “3R” recycle bin which is provided throughout the whole hotel, the company will be giving out a discount voucher of 10% to the customers or providing them a free breakfast voucher. This is to encourage our customer to support the “Go Green” activities and also help us to save a lot of cost. Green Paradise Budget Hotel is a limited company owned by five persons. They are Lim Shee Wei, Chia Pei Jing, Tan Chu Xin, Choo Yee Ying and Chai Teik Jian. They will be the directors of this company and will be directly involved in the whole management and operation of the hotel. Each of them will contribute a total of RM50, 000 into the company, amount a total contribution of RM250, 000 to start up the business.

2.0 Industry Analysis
Social Factor In recent year, people in Malaysia are more environmental consciousness as government and some non-government organization are putting much effort to arouse the importance of environment protection among them. Some greening activities that carry out by the organization such as no plastic bag on Saturday for all the shopping mall and people give an enthusiastic response for supporting this green activity. There is more and more people start to concern about the environmental problem and they are willing to purchase recyclable products. Due to this factor, Green Paradise Budget Hotel arises with green concept budget accommodation as selling point.
Economic Factor Based on World Economic Outlook (WEO) research found out that the global economic growth dropped about 3 percent in 2012 and it predicted that this slow growth trend are likely to be continue. This show that the gross domestic product (GDP) of many countries is difficult to increase and meanwhile the purchasing power of tourists are decreasing. They will prefer more on budgeting trip than luxury. Therefore, Green Paradise Budget Hotel offer tourists the lowest price rate of accommodation and the company believe that it can gain larger profit by attracting larger amount of customer.
Threats of Substitute For Green Paradise Budget Hotel, the threats for substitute is consider relatively high. This is because there are many competitors which exist around this hotel that act as the substitute for the customers if they do not choose to stay in here. When the threats of substitute that the hotel is facing are high, the industry profitability index will be suppressed strongly. This is due to customers will have more options to choose when they feel that the hotel is quite expensive or the environment is not good for them to stay in and they will choose to stay in another hotel instead. For an example, if Green Paradise Budget Hotel offers the same size of room but the price is relatively higher than the other hotels which are available nearby to the hotel, the customers might choose to walk off from this hotel and choose to stay in the other hotel which offers the same size of room but at a lower price as compared to Green Paradise Budget Hotel. Therefore, in order to reduce the like hood that the customers will switch to a substitute competitor, Green Paradise Budget Hotel offers good and comfortable environment rooms at a lower and affordable price with good hotel services and facilities to their customers to prevent them from switching to other competitors instead.
Rivalry Among Existing Firms For Green Paradise Budget Hotel, the rivalry among existing firms is relatively high as well. This is because Green Paradise Budget Hotel is situated at the Petaling Street which is also full of the same type of business industry as well. For example, the Hotel China Town Inn, D Oriental Inn Kuala Lumpur and Swiss Inn Hotel Kuala Lumpur are few of the fierce rivals that Green Paradise Budget Hotel has to compete with. One of the factors that determine the intensity of the rivalry among existing firms is the number and balance of competitors. For this, Green Paradise Budget Hotel certainly has many competitors and it deals with it by providing lower price rates to attract the customers. Next is the degree of difference between products. For this, Green Paradise Budget Hotel uses the special and unique concepts which is the “Go Green” concept to differ itself from the competitors and try to attract more customers. Next is the growth rate of an industry. For this, Green Paradise Budget Hotel is categorized as a slow-growth industry which means that the competition among the firms is stronger. Lastly is the level of fixed cost. For this, Green Paradise budget Hotel has a low level of fixed cost which enables it to offer lower price rates of rooms to its customers to stay in here.
Bargaining Power of Suppliers For Green Paradise Budget Hotel, the bargaining power of supplier is low as there are many suppliers to provide the go green materials to the only company in that area. Green Paradise is the only hotel that using green concept for all the equipment and therefore the suppliers has less bargain power. The company has plenty of solar system suppliers such as Green Electric Sdn Bhd, Real Magic Sdn Bhd, Green Solar Energy Sdn Bhd and Millennium Solar Technology Sdn Bhd and thus the Green Paradise can bargain and choose to purchase the equipment with lower cost. For recyclable furniture, there are different suppliers such as Teakita, WKB Recycle Furniture Trading and CT Wood Marketing Sdn Bhd. The switching cost for the company to change supplier is low and the company can switch to another supplier easily for lower cost.
Bargaining power of buyers For Green Paradise Budget Hotel, the bargaining power of buyers is low. It is depends much on the number of buyers and similar seller on that location. The buyers groups are consider large as the location is visit by a large amount of the tourists and backpackers which are the target customer of the company. Although that location have many similar budget hotel, but the price for each accommodation of Green Paradise Budget Hotel are the lowest if compare to other similar industry in that location. Therefore, the customer has low power to reduce the prices. Besides that, the degree to which Green Paradise Budget Hotel difference from the competitors are high as Green Paradise Budget Hotel is the only one which are using go green materials and also offering “ Green Reward System” that customer can claimed discount or free gifts with some simple green action. These are difference with other competitors and are a selling attraction to choose Green Paradise Budget Hotel.
Threat of New Entrants
For Green Paradise Budget Hotel, the threat of new entrants that it will be facing is consider being relatively high. First barrier is the economies of scale. Green Paradise Budget Hotel has created a large economy of scale by using the greening project, which is the “Go Green” concept in its hotel. This causes the new entrants hard to break into this industry as this project requires high level of cost disadvantages. Next is the product differentiation barrier. Green Paradise Budget Hotel has made itself different among the other budget hotels. Besides providing the best hotel services and low prices for the customers, Green Paradise Budget Hotel also applies the “Go Green” concept in its hotel which makes it different from other budget hotels and creates a whole new living experience for the customer to stay in it. Lastly will be the government and legal barriers. To start up this Green Budget Hotel, a license for the land is needed by the government. Besides that, in order to apply the “Go Green” concept for this hotel, Green Paradise Budget Hotel must also obtain the government’s permission and license and this requires time and an amount of money in order to get this licenses. Some investors might feel this as a threat and time consuming so they will not choose to go on with it.
2.2 Market Analysis Green Paradise Budget Hotel targets those customers who are concern primarily about the price more than the quality level of the hotel. It usually suitable for those travelers and tourists who spend lesser time at indoors and therefore the company targets the most of backpackers, foreign travelers, local’s travelers and drop-in customers that rest for few hours in the budget hotel. The company target low income group and the customer with age group between 18- 40 years old. Green Paradise Budget Hotel target small size travelers but not on family travelers. As mentioned above, the budget hotel are providing accommodation for those backpackers or tourists that are spending more of their time at outdoors so they just need a place for sleep and cleaning purpose. In addition, more and more travelers especially backpackers prefer a budget trip that they are willing to spend less for accommodation fees and always choose the cheapest available as they have limited budget to travel further than other tourists. All the basic facilities are provided and the lowest prices are offered by Green Paradise to meet those customer needs. Besides that, some drop-in customer like those executive or working group who having meeting at that location and need a few hour rest also will be the company target group as budget room are provided to meet their wants by calculating rates per hour for this customer group. There are more green consumer who have strong conscious of environment conscious especially foreigners that concern about protection of environment issue. Green Paradise Budget Hotel target those foreign tourist that having high desire for go green environment.

Competitor Analysis CompanyName | Green Paradise Budget Hotel | Hotel China Town Inn | D Oriental Inn Kuala Lumpur | Swiss-Inn Kuala Lumpur | Hotel Ratings | 2-Star Rating Hotel | 2-Star Hotel Rating | 3-Star Hotel Rating | 3-Star Hotel Rating | Company Recognition | Low | Medium | High | High | Operating Hours | 24 hours everyday | 24 hours everyday | 24 hours everyday | 24 hours everyday | Types of RoomsAvailable | 3 Types:i.) Budget Roomii.) Single Roomiii.) Deluxe Room | 4 Types:i.) Economy Roomii.) Standard Roomiii.) Deluxe Roomiv.) Superior Room | 3 Types:i.) Standard Roomii.) Superior Roomiii.) Family Room | 3 Types:i.) Superior Roomii.) Deluxe Roomiii.) Family Room | Room Rates Range | RM50 - RM120 | RM60 - RM130 | RM108 – RM175 | RM145 -RM205 | Number of Room Available | 65 Rooms | 70 Rooms | 85 Rooms | 150 Rooms | Check In and Check Out Time | Check In and Check Out at 12 noon | Check In and Check Out at 12 noon | Check In at 3pm and Check Out at 12 noon | Check In at 3pm and Check Out at 12 noon | Parking Lots | Available at a surcharge of RM5 per day | Available at a surcharge of RM6.50 per day | Unavailable | Available at a surcharge of RM6 per day | Room Service | Available 24 hours | Available from 9am till 9pm | Available 24 hours | Available 24 hours | Facilities Available | Color Television (AstroChanels Available), Hot Water Kettle, Attached Bathroom With Hot & Cold Shower, Internet Access (Wi-Fi), Hairdryer, Air-Conditioner, IDD Telephone, Car Parks, | Cable Television (Astro Channels Available), IDD Telephone, Internet Access (Wi-Fi), Hairdryer, Safe Deposit Box, Writing Desk, Attached Bathroom, Extra Bed, Car Parks | Television (Astro Channels Available), Complimentary Wi-Fi Access, Hot and Cold Shower, Air Conditioner | Air Conditioning, Color television, In-House Movies, Minibar in All Rooms, IDD Telephone, Electronic Door Lock, Hair Dryer, Coffee and tea Maker, Attached Bathroom with Hot and Cold Shower, Internet Service, Multi-Purpose Function Room | Extra Services Available | Tour Guide Bookings, Laundry Services, Luggage Storing Services, Wake Up Call Services, CCTV Security System, On-line Ticketing | Tour Guide Bookings, Laundry Services, Luggage Storing Services, Wake Up Call Services, Taxi / Limousine Services | Free Mineral Water Daily, Laundry Service, City Tour, Cafeteria | Tour Counter, Laundry Services, Luggage Storage Facilities, On-line Ticketing, Currency Exchanger, Cafeteria |
Green Paradise Budget Hotel is located at the famous streets of Kuala Lumpur, the Petaling Street. This hotel offers travelers with a choice of low prices rooms but yet comfortable and enjoyable for them to stay. All the accommodation available in this hotel is fully furnished and the design of this hotel is the “Go Green” concept which creates awareness for the people who stay in here to do their part in recycling to save the mother earth. One step out of this hotel and you will find yourself indulge in the busy and wonderful Petaling Street which is also known as the Chinatown in Kuala Lumpur. This Chinatown offers a wide range of foods and beverages from local foods to foreign foods. Besides that, you can also find yourself a wide variety of local products as well as t-shirts, shoes and etc. At this hotel, you can also found convenience to get to the Kuala Lumpur city as it is near to the Puduraya bus station and the PasarSeni and Plaza Rakyat LRT station. Green Paradise Budget Hotel offers room with air conditioned and an attached bathroom which provides hot and cold shower for the travelers. Furthermore, Wi-Fi services, tour services, laundry and room services are also available in this hotel. Car parks are also available for those who are driving at the surcharge rate of RM5 per day.

Hotel China Town is a 2-star rated budget hotel which is situated in the heart of Kuala Lumpur's Chinatown. It offers cost-conscious travellers an international standard accommodation and services at an affordable price. The Hotel located in the night market which offers attractive furnished rooms that are quiet and fully furnished with air-condition, carpeted and attached bathroom with hot and cold showers. The Hotel has PABX telephone system, TV, Facsimile, E-mail, Internet, and laundry services. Also available services are the city tours and rent-a-car services.At Hotel China Town Inn, the open air shopping paradise is within a step in front of you and it starts right at the hotel's doorsteps. Here you can buy the likes of Malaysian T-shirts, batik, costume jewellery and wide variety of foods as well. Guests with cars can make use of the car park which is within 5 minutes walking distance from the Hotel. Parking rates is at RM6.50 per night.

D’ Oriental Inn Kuala Lumpur is strategically situated in the heart of the Chinatown Petaling Street, Kuala Lumpur, Malaysia. Travellers can indulge themselves in the shopping paradise of the Chinatown which hosts a wide variety of night and day bazaars and offers whole lots of stuffs from branded t-shits, watches, shoes and etc. Not to forget about the foods also as it is also surrounded by whole lots of hawker stalls which offer a wide variety of Malaysia’s famous foods for your taste buds. This hotel is also located near the Puduraya Bus Station and the Star LRT Station which enable the travellers to travel out to the town more conveniently. This hotel has 85 built and furnished rooms with complimentary Wi-Fi connections. All rooms are fully equip with an individual control air condition system, IDD telephone facility, colour TV, WIFI connection, safety box, laundry services and tour counter offering city and country tours are readily available for our guest.
Swiss-Inn Hotel Kuala Lumpur located at No. 62, Jalan Sultan, Kuala Lumpur, Malaysia, nestled in the heart of the city of Kuala Lumpur. Enjoying a central location, Swiss-Inn Kuala Lumpur is also able to present to its guest the sights and splendour of colourful Chinatown and downtown Kuala Lumpur. This colourful street of shops, restaurants and hawker stalls bustles with vitality. The main bus terminal of Kuala Lumpur, Puduraya and the Light Rail Transit System Station (LRT), PasarSeni Station, are located within 10 minutes walks.Swiss-Inn Kuala Lumpur Malaysia provides 151 fully furnished and tastefully design rooms, designed for your comfort at affordable prices. Standard features of rooms at Swiss-Inn Kuala Lumpur Malaysia includes Individually controlled air conditioning, Colour TV, In House Movies, Mini Bar In the Deluxe Rooms, Electronic Door Lock, IDD Telephone, Bedside Control Panel and many more.
In conclusion, Green Paradise Budget Hotel can be stated as the more outstanding hotel among its competitor. Although the company name recognition is low, but all the other factors enable it to compete well with its competitors. It operates 24 hours every day and provides 3 different selections of rooms for their customers to choose from at a low price as compared to other hotels. Besides that, the location of this hotel is also very strategic as it can be accessed by most of the public transport. It also provides parking spaces for the customers who drive to park their vehicles safely while staying in the hotel. Come to compare about the extra services available, Green Paradise Budget Hotel also do not lose its position but still stand at the same level as other higher class hotels by providing all of the same services available like the others at a low price also. Lastly, this hotel also has its own unique design and theme, which is the “Go Green” concept which makes it standout more outstanding than other hotels. 2.3 Marketing Plan
Process
Green Paradise Budget Hotel has a special concept which known as ‘Green Reward System’. This system are providing different reward to customer if they are showing their support in green activities throughout the period when they are staying in the budget hotel. If customer categorize their rubbish or wasted correctly into the 3R recycle bin, the company will be giving out a discount of 5 percent or either free meal voucher for selected restaurant for those customer. They can claim the offers after the company check the status of the room by using the green detector system whether the customer are handling properly for the waste.
Product and services
The business hour of Green Paradise budget hotel is 24 hours every day to taking reservation and performing check-in and out. The budget hotel provides 65 rooms which estimated can accommodate around 195 persons. All of the accommodation equipment are using recyclable material and the company holding three main principles to fulfill go green concept which are power saving, low water consumption and disposal of solid waste. By introduce this concept, the company cost are reduce in large amount and can offer a low budget price for each accommodation to meet customer needs.
Green Paradise budget hotel is a three storey building where the lowest floor is lobby. Whereas the rooms are categorized into three different sizes which are single room, deluxe room and budget room. There are 30 single rooms with one single bed which can accommodate maximum two people. For the deluxe room, the budget hotel provides 30 rooms which suits for 2 to 4 person with either two single beds or a king bed, while the rest of 5 budget rooms with a single bed are preferable for a backpacker who only want to rest for few hours. To ensure guests are live in a hygienic environment, the common areas will be thoroughly cleaned every 4 hours while the cleaning time for guest rooms is at 12-2pm.
Green Paradise budget hotel also provide complete basic services in every rooms like hot and cold shower, flat screen TV with satellite channels, air-conditioned, clean towel, shampoo and so on. Moreover, it offers free Wi-Fi in the entire hotel and the parking is free. Besides that, morning call is available to meet guests’ needs. They can actually request to customer service department to wake them up at the time they requested.
To be an ideal and successful budget hotel, it also provided CCTV within the corridor and lobby area to make sure that guests are live safety. In additional to that, for those traveler who has not packed enough cloth to last for the duration of their stay, they can take advantage of the laundry service which provided by this budget hotel. Green Paradise budget hotel also offer a full array of services such as tour guide service and contact taxi service for traveler. The tour guide service is divided into three different tours which are adventure tour, shopping tour and explore tour. The experienced and informative guide can satisfy guests by telling them where they can shop at reasonable price and how to get to the places they want to visit.
Place
Green Paradise budget hotel is located at 90, JalanPetaling, 50000 Kuala Lumpur. It is a three-storey corner lot building with an area of first floor dedicated to lobby. This place is nearby Petaling Street or known as Chinatown which is a famous hustling and bustling bargain market. Besides that, it is surrounding by Alamanda Hotel Petaling Street, Kolej Bandar and Swiss-Inn KL. Green Paradise budget hotel is being located in an easy accessible by public transport like LRT, monorail and bus as there are Pudu Raya LRT station, Maharajalela monorail station and PasarSeni bus station. A short walking distance about 15-20 minutes will get you to Green Paradise budget hotel. Thus, it is definitely an ideal location to start this budget hotel business.
Pricing
There are two payment options given to guests to pay for their room fees. First is direct payment by cash at Green Paradise budget hotel. Second is online payment through credit card or debit card when they make reservation. However, any booking will need to pay within 24 hours. If payment is not received within 24 hours, the booking will be automatically cancelled.
The pricing strategy is lower than competitor. Pricing for a single room with maximum two persons is charged at RM 70 per day. For deluxe room, it costs RM 100 per day whereas the pricing for budget room is RM50 per 3hours. All the basic services provided in room are included in the price stated above. However, any extra services such as extra mattress or extra shampoo may need to pay for extra service charge. Furthermore, different tour guide services that provided by Green Paradise budget hotel have different prices. Firstly, shopping tour costs RM 50 for four places which are Pavillion, Sungei Wang, Time Square and KLCC. Secondly, RM 120 per person for adventure tour which includes Batu Caves, Zoo and KL Bird Park. Lastly, Petrol Science, Aquarium and Museum are some of the popular attractions which guests can visit by joining explore tour which is RM180 per person. In the first month of opening day, Green Paradise budget hotel will give a 20% discount to the top fifty guests for any room.
Promotion
Green Paradise budget hotel will distribute direct mails like brochures and flyers as promotion once a month to the nearby offices or passerby. Moreover, newspaper will also be the promotion way to reaching new guests as well as maintain previous customers. The short and brief information about Green Paradise budget hotel will be summarizes such as the primarily benefits and features of the budget hotel, the range of services offer and promotion of specific events. Apart from that, social network is also one of the promotion methods for Green Paradise budget hotel to advertise to the rest of the world. Sign in an account on Facebook and Twitter allows the budget hotel engage guests and reach out to potential customers. All the company information, accommodation environment, special discount rates and promotion events will be post on that fans page so that the customer can know the latest news of the budget hotel. When people join these networks, they can comment, like or retweet on any post and all of the users are able to visit the website, therefore reaching more people. In addition to that, a 50% discount is given to the guests during go green day. With doing this promotion can attract more people and increase the publicity. Besides that, Green Paradise budget hotel also partnership with travel agency such as Groupon Malaysia and Cuti-Cuti Malaysia to promote to the rest of world and gain new customer. These promotion strategies can minimize the cost spending yet gain high sales.

Similar Documents

Free Essay

Bargaining Power of Buyers

...bargaining power of buyers - relatively low power for buyer, since oly few players in the market the buyer has less control over the products, the demand is more and the supply is less. Even now in most of the countries printing play a vital role in the education industry where the printed industry has its control over the buyer. bargaining power of suppliers - moderate influence of suppliers, suppliers who provide the raw materials for the printing industry such as paper pulp, dyes. These suppliers have a moderate control over the industry since there is quite a few number of industries which supplies these materials. Rivalry within d industry - high degree of competition, every nation has several giants in printing industry either in media or the vice versa, hence to catch hold of the market share each player offer prices as low as possible by adopting several cost cutting methods and adopting several innovative methods. Hence innovation is in a continous drive in printing industry threat of new entrants - relatively low, less small scale industry since huge investment is reqd, existing players are of king size,very attractive component for companies who can overcome the barriers because of the excellent stability presented but poses a significant problem for potential entrants. threat of substitute products - there is a great threat from substitute products. Hence constant innovation is required. Tv, internet and ebook readers are the potential threats in the...

Words: 272 - Pages: 2

Premium Essay

Bargaining Power of Buyers

...Bargaining Power of Buyers The existence of influential buyers lessens the profit potential in any given industry. They fuel competition by decreasing prices, bargaining for better quality or more services and playing rivalries opposed to other market giants. The consequences include diminished trade profitability. The bargaining power of buyers involves one of Porter’s five forces which regulate the intensity of an industry. The rest includes; Barriers to entry, industry rivalry, threat of substitutes and the bargaining power of suppliers. The influence of an industry‘s significant buyer groups are determined by: * Relatedness to market situation characteristics * The relative significance of trade from industry as measured against the overall business Below conditions conclude the powerful nature of a buyer group: * The buyer is either concentrated or purchases large quantities * Products obtained from the industry represent a noteworthy percentage of the purchases or the costs of the buyer * Purchased products are undifferentiated or standard- substitutes are easy to find as the competition is tough * Switching costs are very low * The backward integration threat is high * Buyers are price sensitive * Buyer possess necessary information ( they are fully aware about the market prices and supplier costs) Product differentiation is one of the conditions that affect the power of buyers. Chocolate is regarded as a standard product and...

Words: 491 - Pages: 2

Premium Essay

The Bargaining Power of Suppliers and Buyers

...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...

Words: 254 - Pages: 2

Premium Essay

Managament

...Entry Economies of scale mean larger firms can produce at lower cost per unit. This tends to lower the number of firms in the industry and reduce competition. Proprietary product differences are the characteristics that make a product appeal to a large market segment. But only those characteristics that cannot be copied at low cost by competitors (“proprietary”) will be a barrier to entry. Brand identity is the extent to which buyers take the brand name into account when making purchase decisions. Capital requirements are the total cost of acquiring the plant and equipment necessary to begin operating in the industry. 1 This material is a summary drawn from Porter’s Competitive Advantage (1985). The material in question is on pages 5 – 8. 1 “Porter’s Five Forces” by Prof. Lima February 25, 2006 2. Bargaining Power of Suppliers Differentiation of inputs means that different suppliers provide different input characteristics for inputs that basically do the same job. The greater the degrees of differentiation among suppliers the more bargaining power suppliers have. Presence [and availability] of substitute inputs means the extent to which it is possible to switch to another supplier for an...

Words: 931 - Pages: 4

Premium Essay

Bargaining : a Consumer Need or Goal

...of buyers’ attitudes and actions and their relationships depended on the bargaining outcomes. How people differentiate their attitude as per way of bargaining. What all attributes which affect most a consumer bargaining behaviour. The most insightful question which this paper tries to answer “Is bargaining a consumer need or goal?” We tried to identify the "Is bargaining depend upon any cultural or social cause?” Gender, age, lifestyle and many other attribute which can affect bargaining behaviour. Is Bargaining depends upon product specific like apparels, grocery items, durable goods, consumer goods, daily use products etc. We try to give bargaining with 360 degree view by help of seller as well as buyer also. This paper includes both explicit bargaining and the tacit kind in which adversaries watch and interpret each other's behaviour, each aware that his own actions are being interpreted and anticipated, each acting with a view to the expectations that he creates. Introduction "Bargaining power of both buyers and sellers," "bargaining strength of deal making," "bargaining skill adopted by different gender" suggest that the advantage goes to the powerful, the strong, or the skilful. Bargaining is an art which is somehow depend upon personal characteristics and attributes. Bargaining is not a game where only win or lose situation, it can be an intermediate also. Bargaining is one of essential marketing process which have transaction between buyer and seller. Bargaining is...

Words: 5194 - Pages: 21

Premium Essay

Something

...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...

Words: 903 - Pages: 4

Premium Essay

Competition

...effect on business practices, reducing the ability of any company to establish an operational advantage that can be sustained. 103 Internet Technology provides buyers with easier access to information about products and suppliers, thus bolstering buyer bargaining power. 105 With more competitors selling largely undifferentiated products, the basis for competition shifts ever more toward price. 107 On the Internet, buyers can often switch suppliers with just a few mouse clicks, and new Web technologies are systematically reducing switching costs even further. ON COMPETITION Strategy and the Internet 97 Some companies, for example, have used Internet technology to shift the basis of competition away from quality, featurs, and service and toward price, making it harder for anyone in their industries to turn a profit. 98 When seen with fresh eyes, it becomes clear that the Internet is not necessarily a blessing. It tends to alter industry structures in ways that dampen overall profitability, and it has a leveling effect on business practices, reducing the ability of any company to establish an operational advantage that can be sustained. 103 Internet Technology provides buyers with easier access to information about products and suppliers, thus bolstering buyer bargaining power. 105 With more competitors selling largely undifferentiated products, the basis...

Words: 10834 - Pages: 44

Premium Essay

Lvmh Equity Valuation

...Gucci Group N.V. Case Brief Group: Synergy BI4242 Global Strategic Management Section 404 Submitted to A. Pattana Boonchoo November 25, 2005 Mission: The mission of the company is to be a successfully managed multi-brand group in the fashion industry, producing luxury products that will be enjoyed by affluent, style-conscious 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...

Words: 2009 - Pages: 9

Free Essay

Economics

...What are the primary competitive forces impacting U.S. steel producers in general and the producers like Nucor that make new steel products via recycling scrap steel in particular? Please do a five-forces analysis to support your answer. http://www.slideshare.net/sizzlingmayank/strategic-management-4836230 1. -Porter’s Five Forces Analysis of Steel Industry in the United States of America Threat of new entrants Bargaining Power of Suppliers Bargaining Power of Buyers Internal rivalry within Industry Threat of Substitutes 2. Bargaining Power of Buyer’s a. With an increase in domestic competition in steel sector in the USA, the options for buyers are on a rise. b. Low Product Differentiation. c. Switching costs is low. d. Buyers buying in large scale posses strong negotiating power. Buyer’s Market !!! 3. Bargaining Power of Supplier’s a. Scarcity of raw-materials like steel shreds, iron ore, coke, recycled steel. b. Few Suppliers. c. Most of the raw-materials are imported. Cost strategy drives Joint ventures, Mergers and Acquisitions between suppliers and manufactures !!! 4. Major players in the United States of America Major M&A involving foreign partner 5. Internal Rivalry a. Domestic market – more than 20 players. b. Intense rivalry – Price wars. c. No differentiated product. ...

Words: 1161 - Pages: 5

Premium Essay

Industry Analysis

...profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new entrants. Threat of new entrants is high when: * Low amount of capital is required to enter a market * Existing companies can do little to retaliate * Existing firms do not possess patents, trademarks or do not have established brand reputation * There is no government regulation * Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other industries) * There is low customer loyalty * Products are nearly identical * Economies of scale can be easily achieved. * Government policies that encourage competition. Bargaining power of suppliers Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers....

Words: 698 - Pages: 3

Premium Essay

5 Force Model

...reaffirmed his faith in the model, quoting examples from the airline and steel industries. The model along with the others that Porter has developed, such as the value chain, strategic groups and national competitive advantage, continue to influence strategic thinking in profound ways. And yet, one cannot help observing that perhaps the time has come to re-examine these models in the light of empirical evidence. This paper attempts to argue that the usefulness of the five-force model is limited in emerging economies as compared to mature markets. A longitudinal study of the IT Enabled Services Industry in India demonstrates that with low entry barriers, a high degree of competition (industry rivalry), bargaining power of buyers (Fortune 100 companies), bargaining power of suppliers (large manufacturers of hardware who force technological up gradation at regular intervals), and the absence of clear differentiators (or close substitutes being offered), the industry should have been very unattractive according to the five-force model. On a practical level though, the paper shows that the major players in the industry have all been able to turn in stellar performances year after year. With this apparent dichotomy between theory and practice, the paper questions the usefulness of depending on one model for all situations. INTRODUCTION: The five-force model of competition was first introduced by Porter in 1980 in his book on Competitive Strategy. For 30 years since the...

Words: 4583 - Pages: 19

Premium Essay

Porter Analysis

...identified are industry rivalry, threat of entry, bargaining power of suppliers, bargaining power of buyers and threat of substitutes. These forces determine an industry structure and the level of competition in that industry. The stronger competitive forces in the industry are the less profitable it is. An industry with low barriers to enter, having few buyers and suppliers but many substitute products and competitors will be seen as very competitive and thus, not so attractive due to its low profitability. Rivalry among existing competitors or our industry rivalry – this force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits. Threat of new entry – this force determines how easy (or not) it is to enter a particular industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies. When more organizations compete for the same market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new entrants. Bargaining power of suppliers – strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers. This directly affects the buying firms’ profits because it has to pay more for materials. Suppliers have strongbargaining power when there are few suppliers but many buyers, few substitute raw materials exist, suppliers...

Words: 378 - Pages: 2

Premium Essay

Michael Poters Frame Work

...Industry of Tanzania 1 2.0 .PORTER’S FIVE FORCES FRAMEWORK MODEL, PFFF 1 2.1. Degree of rivalry among existing firms. 2 2.2. Threat of substitute Products or Service. 3 2.3. Threats of new entrants 4 2.4 Bargaining power of buyers/Customers. 5 2.5. Bargaining power of Suppliers 5 2.6. Mapping the Porter’s Five Forces Model in the Mobile Industry in TANZANIA. 5 3.0. CONCLUSION. 7 4.0.REFERENCE 8 ABSTRACT The Mobile Phone industry of Tanzania has been growing very slowly in terms of the number of firms in the industry during the last two decades. The growth rate in terms of the number of customers has been very fast. Number of things ishappening within the industry after its liberalization. The aspect of competition is now crucial for the operators who are within the Mobile Phone industry. Porter’s Five Forces Framework is one of the strategic models used to assess the attractiveness of the industry (being service or manufacturing). This model is defined by the five key forces which are; Rivalry among the existing firms, Threat of new entrants,Threat of substitutes, Bargaining power of suppliers and bargaining power of customers. The mobile phone industry of Tanzania has 7 mobile phone operators, and two (2) substitute service provider.Bargaining Power of Suppliers, threat of new...

Words: 2552 - Pages: 11

Premium Essay

Coca Cola Wars Continue: Coke and Pepsi 2010

...Carbonated Soft Drink Industry Analysis A framework, known as the five forces model, was created by Michael E. Porter to assist managers with identifying opportunities and threats within an industry by analyzing the competitive forces. His five forces consist of: the risk of entry by potential competitors, the intensity of rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of suppliers, and the closeness of substitutes to an industry’s products. The Carbonated Soft Drink (CSD) Industry will be thoroughly analyzed using Porter’s Five Forces. Risk of Entry by Potential Competitors With high barriers to entry, the risk of potential competitors entering into the CSD industry is low. The high cost of developing a manufacturing plant in order to meet demand is a barrier that makes the risk of entry low. Coke and Pepsi have spent numerous amounts of money to gain the brand loyalty of their customers. Because brand loyalty is already established in the CSD industry, the risk of competitors entering is lowered. Due to brand loyalty, both Coke and Pepsi have a high demand for their products. Both companies are able to produce in mass quantities and lower the variable cost for each product. With the variable cost being lowered, they are able to lower their selling price. Another barrier that lowers the risk of entry is franchise agreements that Coke and Pepsi have made with their bottlers. The agreements state that...

Words: 852 - Pages: 4

Premium Essay

Porter Five Model

...market segment is determined by five competitive forces namely: 1. Threats of potential new entrants 2. Bargaining power of buyers 3. Bargaining power of suppliers 4. Threats of substitute products 5. Rivalry among competitors 1. Threats of potential new entrants The threat of new entrants is usually based on the market entry barriers, which can be said to provide obstacles for newcomers to gain a foothold in any given industry. These barriers can take many different forms. Briefly, it can be said that entry barriers exist whenever it is difficult or not economically feasible for an outsider to copy or imitate the existing player’s competitive capabilities. Common forms of entry barriers are depicted below: * Economies of scale * Capital requirement of entry * Access to supplies and distribution channels * Customer or supplier loyalty * Lack of experience in industry * Legal restrains such as trade barriers 2. Bargaining Power Of Buyers Important determinants of buyer power are the size and the concentration of customers. Other factors are the extent to which the buyers are informed about other vendors and suppliers and to the extent to which buyers can quickly identify other sources of supply. Common reasons for great bargaining power of buyers are depicted below: * Great concentration of buyers – few buyers * The cost of switching supplier is low * Many equally competent suppliers...

Words: 525 - Pages: 3