- Published: November 14, 2021
- Updated: November 14, 2021
- University / College: Florida State University
- Language: English
- Downloads: 1
Bargaining Power of Suppliers
Supplier bargaining power is likely to be high.
*The market is dominated by a few large suppliers rather than a fragmented source of supply,
*There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins.
*Forward integration provides economies of scale for the supplier
Bargaining Power of Customers
Customers bargaining power is likely to be high
*Switching to an alternative brand or store is relatively simple and is not related to high costs,
*Customers have low margins and are price-sensitive,
*The product is not strategically important to the customer,
*There is the possibility for the customer integrating backwards.
Threat of New Entrants
The competition in a sports good industry will be high; it is easier for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e. g. market shares, prices, customer loyalty) at any time.
*Distribution channels are controlled by existing players,
*High switching costs for customers
Threat of Substitutes
Threat from substitutes in a sports goods retail industry is high
*there are many possible substitutes such as the internet, chains outside of the city and small specialty stores that sell a small number of sporting goods.
Competitive Rivalry between Existing Players
Competition between existing players is likely to be high
*There are many players of about the same size,
*Players have similar strategies
*use of internet, allowing customers to buy from other stores
There is not much differentiation between players and their products; hence, there is much price competition Barriers for exit are high (e. g. expensive and highly specialz-ed equipment)
Note: we can state from porter’s five forces that it is not a very attractive industry to enter. The competion is high and survival rate is low. In Boston, there are more that 50 stores, making it harder for a new one to enter this field. The suppliers have a strong hold over the market with customers having their own brand preferences and loyalty.
