Kmart
CIS 790
Xianxi Feng
Kmart
According to figure 1, Michael Porter provided a framework that models an industry as being influenced by five forces which are threat of new entrants, threat of substitute products or services, rivalry among existing competitors, bargaining power of suppliers and bargaining power of buyers. First of all, “new entrants to an industry bring new capacity and a desire to gain market share that puts pressure on prices, costs, and the rate of investment necessary to compete.” (1) Second of all, substitute products refer to the products in other industries. When a product’s demand is affected by the price change of a substitute product, a threat of substitutes exists. Third of all, “rivalry among existing competitors takes many familiar forms, including price discounting, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry. The degree to which rivalry drives down an industry’s profit potential depends, first, on the intensity with which companies compete and, second, on the basis on which they compete.” (1) Forth of all, supplier power refers to the ability of providers of inputs to determine the price and terms of supply. Suppliers can exert power over firms an industry by raising process or reducing the quality of purchased goods and services, so reducing profitability. Finally, the more powerful a buyer is relative to the seller, the more influence the buyer has. This influence can be used reduce the profits of the seller through a reduction of prices, increased favor in customer service or order delivery, or influence over who the seller suppliers to.
Figure 1 According to figure 2, the primary valued chain activities include inbound logistics, operations, outbound logistics, marketing & sales and service. The goal of these activities is to generate a profit margin. Inbound logistics include the receiving, warehousing, and inventory control of input
Xianxi Feng
Kmart
According to figure 1, Michael Porter provided a framework that models an industry as being influenced by five forces which are threat of new entrants, threat of substitute products or services, rivalry among existing competitors, bargaining power of suppliers and bargaining power of buyers. First of all, “new entrants to an industry bring new capacity and a desire to gain market share that puts pressure on prices, costs, and the rate of investment necessary to compete.” (1) Second of all, substitute products refer to the products in other industries. When a product’s demand is affected by the price change of a substitute product, a threat of substitutes exists. Third of all, “rivalry among existing competitors takes many familiar forms, including price discounting, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry. The degree to which rivalry drives down an industry’s profit potential depends, first, on the intensity with which companies compete and, second, on the basis on which they compete.” (1) Forth of all, supplier power refers to the ability of providers of inputs to determine the price and terms of supply. Suppliers can exert power over firms an industry by raising process or reducing the quality of purchased goods and services, so reducing profitability. Finally, the more powerful a buyer is relative to the seller, the more influence the buyer has. This influence can be used reduce the profits of the seller through a reduction of prices, increased favor in customer service or order delivery, or influence over who the seller suppliers to.
Figure 1 According to figure 2, the primary valued chain activities include inbound logistics, operations, outbound logistics, marketing & sales and service. The goal of these activities is to generate a profit margin. Inbound logistics include the receiving, warehousing, and inventory control of input
References: 1. Michael E. Porter. The Five Competitive Forces That Shape Strategy. January 2008. 78-93. http://www.asec-sldi.org/dotAsset/292822.pdf 2. Mcafee, R. Preston (2002), page 17. Competitive Solutions. Princeton, NJ: Princeton University Press. 3. Baselinemag. How Kmart fell Behind. Dec. 10, 2001. http://www.baselinemag.com/c/a/Projects-Supply-Chain/How-Kmart-Fell-Behind/