supermarket and grocery store industry threat of new entrants

Historically, when studying the competitive environment, firms concentrated on companies with which they competed directly (competitor groups). Porter’s five-forces model of competition expands the arena for competitive analysis. The intensity of industry competition and an industry’s profit potential (as measured by the long-run return on invested capital) are a function of these five forces of competition: the threats posed by new entrants, the power of suppliers, the power of buyers, product substitutes, and the intensity of rivalry among competitors. The industry environment has a more direct effect on the firm’s strategic competitiveness and above-average returns than the general environment. According to Porter, the likelihood of firms making profits in a given industry depends on five factors: (1) barriers to entry and new entry threats, (2) buyer and (3) supplier bargaining power, (4) threat from substitutes, and (5) the degree of rivalry of competitors in the industry. Porter’s model attempts to analyze the attractiveness of an industry by considering five forces within a market. Here you will find that your understanding of the microenvironment is particularly helpful. You can distill the results of PESTEL and microenvironment analysis to view the competitive structure of an industry using Michael Porter’s five forces, see Figure 3.1. Porter’s Five-Forces Analysis of Market Structure The way these relationships develop can affect the costs, quality, and overall success of a business. Accordingly, the industry microenvironment consists of stakeholder groups that a firm has regular dealings with. Instead of upstream and downstream, the terms wholesale and retail are often used. For example, the oil production market is upstream of the oil-refining market (and, conversely, the oil refiners are downstream of the oil producers), which in turn is upstream of the gasoline sales market. Upstream markets are the industries that provide the raw material or inputs for the focal industry, while downstream markets are the industries (sometimes consumer segments) that consume the industry outputs.

In part, these strategies are chosen because of the influence of an industry’s characteristics. Typically, industries include a rich mix of competitive strategies that companies use in pursuing strategic competitiveness and above-average returns. In the course of competition, these firms influence one another.

An industry is a group of firms producing products that are close substitutes. When we say microenvironment (or alternatively, Competitor Environment) we are referring primarily to an organization’s industry, and the upstream and downstream markets related to it. Analyzing the Organization’s Microenvironment

Supermarket and grocery store industry threat of new entrants