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Porters Five Forces Model On Retail Industry

Precis
1. 2. 3. 4. 5. 6. 7. 8. Introduction. Diagram of model. Model brief. Food retail industry. Market segmentation. Ranking on model. Analysis Conclusion.

Preamble
Michael Porter described a concept that has become known as the "five forces model". Using this model, business leaders can develop a strategic edge over rival firms by better understanding. Porters approach takes an industry vista helping you to assess, at a corporate strategy level, the attractiveness of the industry to potential entrants at a given time.

Potential entrants

Suppliers

Intensity of rivalry

Buyers

Substitutes

Forces Model Porters model


Threat of new entrants:
Power is also affected by the ability of people to enter your market. Entry of potential competitors to an industry is a threat of the profitability established players.
Suppliers: The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. The bargaining power of suppliers is also described as the market of inputs.

Cont Cont
Substitutes:
Substitutes are those products, which satisfy similar needs though appear to be different.This is affected by the ability of your customers to find a different way of doing what you do.

Buyers:
Buyers are viewed as a threat when they force the companies to charge low prices or demand higher quality and better service with their bargaining power. The bargaining power of customers is also described as the market of outputs

Cont. Cont
Intensity of rivalry:
The number and capability of your competitors is very important. For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

Food Retail Industry Food Retail Industry


Market Definition :
The food retail industry consists of the total revenues generated through food sales from supermarkets, hypermarkets, cooperatives, discounters, convenience stores, independent grocers, bakers, butchers, fishmongers and all other retailers of food and drink for off the premises consumption.

Research Highlight
The Indian food retail industry generated total revenues of $168 billion. It represents annual growth rate (CAGR) of 5.7%

The food specialists were the industry's most lucrative segment in 2006.

Market Segmentation
Others-65.1% Food Specialists-28.8% Discounters-4.1% Supermarkets1.4% Hypermarkets0.7%

Potential Entrants
The threat of new entrants is strong. Market entry is easier for domestic players than foreign companies. It is a threat of the profitability of established players. New entrants bring in new capacity, substantial resources and aggressiveness to gain market share.

Potential Entrants
3 2
1
HIGH
1) Level of Government Regulation 2) Capital Requirment MEDIUM 3 3

LOW

3) Access To Suppliers 4) Existing Brand Strength. 5) Rate of Market Growth.

2 2 2

STRONG

Suppliers Power
The bargaining power of suppliers is considered a threat to new entrants. Suppliers enjoy bargaining power by raising the price or reduce the quality of purchased goods and services. Suppliers can threaten with forward integration and compete directly with the existing firms.

Suppliers Power
3
HIGH 1)Number of Suppliers 2 2) Importance of Industry 1 to Supplier Revenues. 3) Availability of 3 Substitute Raw Materials. 4) Level of Raw Material Differentiation. 5) Switching Costs. 2 1

2
1

MEDIUM

LOW

MODERATE

Buyers power
Buyers often wants high quality at lower price. Buyers can be viewed as weak, if they give the company the opportunity to raise prices and make more profits.

The bargaining power of customers is also described as the market of outputs.

Buyers power
3
2
HIGH
1)Number of buyers 1

2)Level of product
MEDIUM 3)Cost of product 4)Number of buyer profitability

3
3 2

LOW

5)Importance of product

MODERATE

Rivalry
The number and capability of your competitors is very important. Rivalry occurs because one or more competitors either feels the pressure or sees the opportunity to improve position.

Rivalry
3 2 1
HIGH 1) Number of Competitors. 2) Level of Product/Service Differentiation. 3) Exit Barriers. 4) Importance of Industry to its players. 5) Cost of Capacity Increases. 3

MEIDUM

2
3 1

LOW

STRONG

Substitutes
The major substitutes to food retail are food service and subsistence farming. The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives.

Substitutes
3
2 1
HIGH
MEDIUM LOW 1) Switching Costs. 2) Price of Substitutes. 3) Benefits of Substitutes. 1 1 2

WEAK

Analysis
1) Potential Entrants 2) Suppliers Power 3) Buyers power STRONG MODERATE MODERATE

4) Rivalry
5) Substitutes

STRONG
WEAK

Conclusion
According to the analysis of the Porters five forces model , An existing food industries may or may not face risk in their future life of business from becoming entrants. Similarly, there is very great opportunity for new industries to show their skills, butcan be chances of loosing a business due to strong competitors.

THANK YOU

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