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How do I find this information about AmazonGo grocery store? Industry Analysis & Trends Use Michael Porter's classic article to structure this component.Competitive forces model
How do I find this information about AmazonGo grocery store?
Industry Analysis & TrendsUse Michael Porter's classic article to structure this component.Competitive forces model is an important tool used in a strategic analysis to analyze the competitiveness in an industry. This model is more commonly referred to asPorter's Five Forces Model, which includes five forces intensity of rivalry, threat of potential new entrants, bargaining power of buyers, bargaining power of suppliers, and threat of substitute goods and/or services. This model helps company understand the risks in the industry it is operating in and decide how it wants to execute its strategies in response to competition.
Intensity of Industry Rivalry-There are multiple factors which can impact the intensity of rivalry within an industry.
Concentration of rivals- the more competitors, the more intense the rivalry
Product homogeneity- industries selling very similar products are likely to be more competitive
Consumer switching costs- if it costs consumers a lot to switch from one company's product to its competitor's, the company is likely to face less competition
Excess production capacity- when there is excess production capacity available in an industry, there is a higher chance of increased rivalry as companies find the industry more attractive to enter
Brand loyalty- rivalry is high when customers have low brand loyalty
Network effects- refers to the positive effect on the value of a product when there is an additional user of the product. When a network effect exists, the value of a product or service increases as more people are using it.
Threat of Potential Entrants-Threat of potential entrants are impacted by things such as:
Brand loyalty
Cost advantage or economies of scale- threat of potential entrants tends to be higher when companies can realize economies of scale by mass production
Switching costs
Network effects
Excess production capacity
Government regulation- industries with strict government regulation pose higher barrier to potential entrants
Barriers to exit- when exiting an industry requires a high costs, companies are less likely to enter the industry in the first place
Investment in specialist equipment - companies also consider the amount of capital need to be invested in specialist equipment when entering an industry
High fixed costs- things like specialist equipment, properties and land are examples of high fixed costs
Specialized skills- when entering an industry required specialized skills or techniques, there is a higher barrier to entry for potential entrants
Bargaining Power of Buyers- The bargaining power of buyers is high when:
Bargaining Power of Suppliers
Threat of Substitute Goods/Services
Power of Complementary Good/Service Providers
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