Analysis of Competitive Environment using Porter's Five Forces

This report applies Porter's Five Forces model to analyze the competitive environment within the retail industry. It examines the bargaining power of both buyers and suppliers, highlighting their impact on market dynamics. The report further explores the effects of substitute products and complementary goods on pricing and demand, providing insights into how changes in prices can influence consumer behavior and market strategies. The analysis includes an examination of the competitive landscape, emphasizing the importance of understanding these forces for strategic decision-making and market positioning within the retail sector. The report also provides a concise overview of the food retail and wholesale industry. The report concludes with a list of references supporting the analysis.

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Table of Contents
MAIN BODY..................................................................................................................................2
Porter’s five force model.............................................................................................................2
Impact of change in prices...........................................................................................................2
REFERENCES................................................................................................................................4
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MAIN BODY
Porter’s five force model
The five force model of Porter’s is used to analyse the Competitive environment that the
company is currently experiencing in the current industry. The food retailers and wholesalers is
an enormous industry that has many competitors and regulators in its market (Karagiannopoulos,
Georgopoulos and Nikolopoulos, 2005). There are five forces i.e. Existing Rivalry, Bargaining
power of suppliers, Bargaining power of buyers, Threat of new entrants and Threat of substitute
products.
Bargaining power of Buyers (High): There are a number of food retailers in the market and
therefore the bargaining power of buyers is high since they can easily shift form one retailer to
another. This high bargaining power leads to reduced control of the retailers over their prices and
they are forced to move along with the market forces which ultimately avoids situation of
monopoly.
Bargaining power of Suppliers (Low): Due to the large number of companies and brands
operating in the food retail sector, there are a large number of suppliers as well (Grundy, 2016).
Therefore, suppliers cannot adopt monopolistic prices and have to charge the price that is
charged by competitor supplier since company can easily shift form one supplier to another.
Therefore bargaining power of suppliers is low.
Impact of change in prices
Demand for substitute products: Substitute products are those where consumption of one good
can be substituted with another as well because both satisfy same needs (Duan, Yao and Huo,
2015). When the price of one good increase the quantity demanded of its substitute product also
increases and when price of one good falls the demand for other substitute product decreases. For
e.g.: Tea and coffee. When price of tea increases, demand for coffee increases and when price of
tea falls, demand for coffee falls because consumer can shift back to consuming tea.
Demand for Complementary Products: Complementary goods are those whose consumption
depends on each other i.e. one cannot be consumed without consuming another. When the price
of one good increases, the demand for its complementary product automatically decreases and
when the price decreases, the demand for another increases (Amir, Erickson and Jin, 2017). For
e.g.: Car and petrol are complementary goods i.e. one cannot be used without using another.
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Therefore, when prices of petrol increases, the demand for car decreases and when the prices fall
down, the demand for car automatically increases.
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REFERENCES
Books and journals
Amir, R., Erickson, P. and Jin, J., 2017. On the microeconomic foundations of linear demand for
differentiated products. Journal of Economic Theory, 169. pp.641-665.
Duan, Y., Yao, Y. and Huo, J., 2015. Bullwhip effect under substitute products. Journal of
Operations Management, 36. pp.75-89.
Grundy, T., 2016. Rethinking and reinventing Michael Porter's five forces model. Strategic
Change, 15(5). pp.213-229.
Karagiannopoulos, G.D., Georgopoulos, N. and Nikolopoulos, K., 2015. Fathoming Porter's five
forces model in the internet era. info, 7(6). pp.66-76.
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