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Apart from this, the industry bargaining power will be expected to be high for those products for which quality is given utmost importance.

Moreover, if concentrated numbers of buyers purchase a large quantity of products, then the bargaining power of the buyers is expected to be higher.

Buyers include the end consumers, distributors, retailers and the industrial purchasers.Ī buyer’s bargaining power is expected to be higher if the scope for switching from one supplier to another exists. Bargaining Power of the Buyersīuyers are the firms or the individuals who are the ultimate purchasers of the industry products and services. If we analyze the retail industry, various factors such as availability of alternative options for buying like online shopping, different modes of payment, availability of home delivery service, and cost of the substitute products can intensify the threats from the substitutes. The willingness of the buyers to buy the substitute products is directly dependent upon various factors such as quality, prices and the performance of the substitute products. With the availability of more substitute products, the buyers will get more options to choose from the available alternatives for satisfying their requirements. In the retail industry, the threat from the substitutes is very high. This is because substitutes directly influence the prices of the products and the demand for the products from the customers as well. The existence of substitutes will definitely affect the attractiveness of the industry and lower the profitability. Apart from this, the threat to the entry of new players could be from the differentiation of the product, capital investment strength and strong loyalty of the customers for the existing players. Barriers for the new entrants can also be imposed by gaining a cost advantage or low-cost leadership and also in the form of economic regulations or trade barriers for foreign players. These barriers can be imposed by strengthening the distribution infrastructure and the supply chain framework. As a result of this, the existing players may impose barriers to entry in the industry for the new players. The competition in the retail industry is quite fierce and intense. The new entrants can offer low-cost offerings with improved features for luring the customers. New entrants will be able to learn from the mistakes of the existing players and may join the industry with improved strategies or corrective measures. This is one of the key factors which will ultimately be deciding the attractiveness of the retail industry.

Let’s analyze each of these forces from a retail industry perspective: Threat from the Competitors The Five forces are Threat from the Competitors, Threat from the Substitutes, Buyer Bargaining Strength, Supplier Bargaining Power and the Intensity of the Competitive Rivalry. It provides key insights to the organizations for crafting and implementing both long-term and short-term strategic plans. It is a major strategic tool used for determining the industry potential/prospects and the possible threats which may limit the attractiveness of this industry and prevent new entrants from joining the competitive battle. Michael Porter’s Five Forces Model helps in the determination of the industry attractiveness and in analyzing the prospects of growth and opportunities by assessing the competitive trends and the intensity of the rivalry amongst the existing competitors.