Section 2: Analysis of Competition To discover effectual sources of competitive benefit, an analysis of the business’s structure should be taken on. Thus, to analyze the Tesco’s competitive atmosphere, Porter’s five forces of competition theory have been used as follow: threat of new entrants, power of buyers, power of suppliers, threat of substitutes and competitive rivalry. Threat of New Entrants Basically, the greater the barriers to entry are, the greater the possible success of the companies in a particular industry. The threat of new entrants in the food retail industry is weak. It generally involves a vast amount of capital investments to be competitive in the industry and to set up a brand.
It is depends on the existing firms and the “height” of barriers to entry that attributes of an industry’s structure. The threat of new entrants will affect by: Firstly, the economics of scale as “high” barriers to entry into the industry that can make the industry more attractive because of the existing firms can earn expect above normal profits. Secondly, the product differentiations that the existing firms have their own brand identification and customer loyalty that will lead to new entrants use more costs to start other industry and then reduce their potential return. Thirdly, cost advantages independent of scale mean that the existing firms have a whole range of cost advantages. There are proprietary technology, managerial know-how, favorable access to raw materials, and learning-curve cost advantages.
The influence of rivalry is high if competitors are equal in size and power, barriers to exit are far above the ground, and growth of the industry is near to the ground. The price competition transfer profits from industry to customers that is why rivalry is destructive to profitability. Price competition occurs when the switching cost for buyer is low and product or service are almost same, marginal cost is low and fixed cost is high, capacity must be efficient, and product is perishable. Profitability can be less affected by the brand image or timely delivery as compare to price competition. Zero-sum competition is when all the competitors are focusing on same attributes or needs.
Trung Nguyen is known as the Vietnam’s most successful coffee company, introducing modern coffee franchise to the country in the late nineties, with an astounding 1000 cafes across Vietnam today. They are an international company with a clear mission: to couple sustainable coffee production with creative new products and flavor. The leadership of Dang Le Nguyen Vu, the distinct styled “king of coffee” passionately promotes coffee as fuel for a knowledge economy, energy for the brain and a drink “without borders”. Unique and inspiring, Trung Nguyen takes a truly Vietnamese approach to coffee, even boasting their own “Trung Nguyen coffee village” amongst their plantation and research facilities in the Vietnamese highlands. However, Trung Nguyen
Porter’s Five Forces Akin to the PESTEL analysis, the Porter’s Five Forces enables an organization “to understand and cope with the competition (Porter, 2008).” The framework requires the organization to analyze the threat of new entrants, the power of buyers and suppliers, the threat of substitutes, and rivalry among existing competitors. The threat of new entrants in an industry brings new capacity, the desire to gain market share, and most often substantial resources (Harvard, 2018). A low threat of new entrants makes an industry more attractive and increases profit potential for the existing companies competing within the industry. Alternatively, a high threat of new entrants make an industry less attractive and decreases profit potential for the existing companies competing within the industry. According to Kluyver & Pearce (2012), some possible barriers to entry include capital requirements, product differentiation, cost disadvantages, access to distribution channels, economies of scale, and government policy.
According the him, regardless of the business industry, the origin of the profitability is identical. Knowing these competitive forces and industry structures are very significant in formulating the strategy. Five Forces The first force is the competitive rivalry. The number of competitors and their capabilities must be examined. When there are competitors selling equal products, suppliers and buyers might avail from other companies.
This has some external factors affecting it. Some are high number of firms and low switching of costs, both are strongly affected forces on competitive rivalry of Unilever. In such a big market, it’s very easy for a customer to switch to other brand. For that purpose low switching of prices have a very strong effect on their market value. Thus, in the case of Unilever the competitive rivalry is strongly
state of competition and the underlying economics within an industry. It also encourages the strategists and marketers to get outside the small circle of current competitive events to other actions and influences that determine potential profitability and growth. Five Forces that determine industries competition: • The threats of new entrants; • The bargaining power of suppliers; • Current competitors in the industry; • The bargaining power of customers; • The threat of substitute products or services; To understand better industry and market, it’s strong and weak sides it is recommended and very helpful to use Porter’s Five Forces Model Framework. It is essential to examine coffee industry using this Framework to be able to see the future perspectives of the industry. The threats of new entrants or barriers to Entry: In the present modern world where coffee is set to be really popular among different kinds and types of people more and more people and companies are getting involved into coffee business.
Bargaining power of suppliers Supplier mainly through to increase input prices and to lower the quality of unit values so that to influence the profitability of existing enterprises and their competitiveness in the industry, such as selling raw materials in a high price to obtain some of the industry’s profits. Supplier power depends on what kind of input they provide the buyer, when the supplier provides a larger proportion or larger total product cost that will cause a very important element of quality of buyer’s products. The potential bargaining power of the supplier will be greatly enhanced since they know that the supply chain is an essential process of the buyer’s business. Certainly, if you have the fewer the suppliers who are your
In the market, everything which is essential faces the pros and cons. For Pokka, the demand will be high for supply which is apparently good and the bargaining power of the retailers might affect the production speed and its price. Four Strategic