...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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...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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...Threat 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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...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...
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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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...Porter’s 5 Forces Analysis = Suppliers, Customers, New Entrants, Substitute Products, Competitors What is Porter’s 5 Forces Analysis? Porter’s 5 forces analysis represents the competitive environment of the firm. It is a strategic foresight to avoid putting the competitive edge at risk and ensure the profitability of products on a long term. For the company this vision is quite important because the firm is able to direct its innovations in terms of choice of strategies and investments. The profitability of businesses within the industrial structure depends on the following forces: Competitive rivalry within the industry; Threats of new entrants; Threats of substitutes products; Bargaining power of customers; Bargaining power of suppliers. Golden Rules 6th force = Often the model is adjusted with a 6th force, the public authorities. This is important because the law and the norms can influence each of Porter’s 5 forces. Key factors for success = The key success factors of the environment have to be identified. To have a competitive advantage some strategic elements should be controlled. Threats of new entrants Public Authorities Bargaining power of suppliers Competitive rivalry within the industry Bargaining power of customers Threats of substitute products © Copyright 2008 LUXINNOVATION G.I.E., The National Agency for Innovation and Research in Luxembourg 1/2 Porter’s 5 Forces Analysis = Suppliers, Customers, New Entrants, Substitute Products...
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...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...
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...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...
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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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...Producers 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...
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...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...
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...specialty retailers of women apparel, meaning that a lot of specialty retail store (Director, 2007). Furthermore meaning that the competitive advantage of Ann Taylor, New York & Company is very strong, which puts a stain on new entrees. 2.) The bargaining power of the buyer: The bargaining of the buyer is low to medium. According to Gina Bert a journalist from the Prezi website, stated that the bargaining power of the buyer is low because when the demand of a quality product is high Ann Taylor can charge beneficially price for their company. So the buyer doesn’t have much say in the price they pay for the product, because in a specialty retail store like Ann Taylors you don’t find a lot of trying to negotiate the price at the checkout (Bert, 2013). Minimal substitution and brand identity plays a huge role in Ann Taylor favor when it come to the bargaining power of the customer. 3.) The bargaining power of the supplier: Normally the bargaining power of the supplier would be very high, but since Ann Taylor has above average differentiation inputs that sets them apart in their market. So their bargaining power of the suppliers is small to medium. According journalist Gina Bert, Ann Taylor the bargain powers of the supplier are medium to low because they have controlled their impacts on...
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...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...
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...industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. Porter referred to these forces as the micro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. The five forces of porter’s five forces model are as follows: 1. The threat of the entry of new competitors 2. The threat of substitute products or services 3. The bargaining power of customers (buyers) 4. The bargaining power of suppliers 5. The intensity of competitive rivalry 1. The threat of the entry of new competitors Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. The new entrants face barriers to entry. They need to overcome them to compete successfully. Some of the barriers are capital requirement, customer loyalty, experience, etc. Specialized technology, production and distribution require high capital costs which acts as one of the barrier. The high customer’s loyalty and experience of the established firms also acts as the barriers. Established firms have advantages over the cost...
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