Free Business Dissertations - Threats Of New Entrants New Entrants To An Industry Bring New Capacity, The
Threats of new entrants
New Entrants to an industry bring new capacity, the desire to gain market share and often substantial resources. Companies diversifying through acquisition into the industry from other markets often leverage their resources to cause a shake up. Opening up of retail markets by governments invites new and big players from another country. Consolidation continues at a high level and powerful players are shifting the competitive landscape further as Wal-Mart, Carrefour and Tesco penetrate global and regional markets.
Bargaining power of customers
It has been becoming increasingly difficult for to retain customers as they constantly pursue lower prices. Consumers demand for value, propels stores like Tesco to continually try to improve the quality of its customer service provision and the large range of goods and services it is offering. It has expanded from its base from the UK market to other countries. It has increased its product portfolio including personal finance, internet shopping, electrical, home entertainment, home shopping, and even furniture in the largest stores. It continues to increase market share through offering cheaper prices, offering better value and providing more choice and convenience.
Bargaining power of suppliers
Suppliers can exert bargaining power on participants in an industry by raising prices or reducing the quality of purchased goods and services. Powerful suppliers can thereby squeeze profitability out of an industry unable to recover cost by increasing its own prices. In the global retailing industry it is important to procure goods from various sources instead of from a concentrated supplier. Tesco International has various offices in different regions in the world in order to diversify it supplies. It has offices across the region: Thailand, India, Sri Lanka, Mauritius, Bangladesh and China.
Threats of substitute products
By placing a ceiling on prices it can charge, substitute products or services limit the potential of an industry. Unless it can upgrade the quality of the product or differentiate it somehow, the industry will suffer in earnings and possibly in growth. Manifestly the more attractive the price performance trade off offered by substitute products, the greater the limit placed on the industry’s profit potential. There is no threat for retailers given the environment. However small companies know their customers by names and understand their choices and preferences.
Competition within the industry
Rivalry among existing competitors takes the familiar form of jockeying for position using tactics like price competition, product introduction and advertising campaigns.
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