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According to Michael Porter, an industry is affected by particular forces, which allow them to achieve various levels of profitability. These five forces assist supervisors analyze the market to get a much better understanding and develop a more efficient organisation method. In the discount rate selling industry, it is essential to consider the following when thinking about entry:
Hazard of New Entrants: Four major rivals, WalMart, Kmart, Target and Costco Wholesale control the discount retail market. The danger of brand-new entrants is low, as this little number of large companies has spent years developing their position in the market.
While online retailers, such as Amazon.com, and smaller department stores do create a semi-competitive environment, there is no major threat as the entry barriers are high (there is major risk and expensive start-up costs) and small start-ups are discouraged from trying to penetrate the market.
The lack of patents and government regulation allow the existence of small department stores in the industry, but their expansion is limited.
Rivalry Within the Industry: In the discount retail industry, there is fierce competition among the major brands, as products sold are usually relatively price elastic; most of the shoppers are looking for the “best value for price” and the goods are not significantly differentiated from one another.
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This leads to efficient management and competitive costs. While dollar stores and other small retailers have established a niche market, they do not pose a significant threat to the market leaders.
Supplier Power: The existence of a large number of suppliers and limited shelf space has lead to low supplier power; retailers like Kmart are free to switch to alternate, cheaper brands.
Threat of Substitutes: In terms of brand identity, the main players attempt to differentiate themselves from each other by emphasizing on their strengths; while WalMart is known as the price leader, Target
How michael porter five model affects Costco Wholesale Corporation?. (2016, Apr 24). Retrieved from https://studymoose.com/how-michael-porter-five-model-affects-costco-wholesale-corporation-essay
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