Eric Volz
My product is a workout machine that is used for weight training like the Bowflex, Gold Gym’s XRS, and Body-Solid Double Stack Gym, and this product allows people to workout at home; instead of, people having to fight over workout equipment at a gym. For the model:
1. Bargaining power of buyers is relatively high for a couples reasons, and one would be that there are only a few vendors of these types of workout machines that are relatively priced in the same range, so the buyer could have the power to bargain on the price a little bit and pick between the machine he or she likes the best. The importance of each buyer to the new vendor when entering this market also allows the buyer of a workout machine to have some leverage on price over the vendor because not a lot of people are going out buying machines like these on a daily basis, so the select people that are exercise conscious and want it in the convenience of their own home isn’t a too wide range of people.
2. Bargaining power of suppliers is high in making the machines for the company because there aren’t too many manufacturers out there making these types of machines, or suppliers willing to take on making such as high priced machine without having to make a high starting price to start production, so the supplier can dictate the prices, thus raising them whenever they feel the need.
3. Threat of new entrants is relatively medium because the startup costs to produce the expensive machines and having large enough inventory of the workout machines to sell would be expensive and to store the machines in a large warehouse or many warehouses would be costly, so a company might not enter the market. Also, there is low product differentiation in the workout machines, so if a company had the capital to enter the market and produce a high quality machine that is relatively the same to everyone else’s product then that company could compete in the market too. The brand equity of companies like bowflex already have where people just want their machines because of the high quality product and their name alone might deter other companies from entering the market as well.
4. Threat of substitute products is relatively low because people might want a cardio workout machine compared to a weight training machine instead, but that would appeal to a different market of buyers. The real threat that I see would be a gym such as LA Fitness or 24 Hour Fitness with people wanting a wider variety of workout machines compared to someone who wants the comfort of working out in his or her home, or he or she could be self-conscious about his or her appearance and want to work out at home.
5. Intra-industry rivalry is high because only a few companies are selling these workout machines and each company must show why their product is better than others and, the workout machines are pretty much similar; therefore, companies need to try to differentiate themselves from the other company’s machines, thus making competition stiff amongst the competing companies.