LA #1
The industry I will use is retail and the specific company is Best Buy. For the specific company, the key driver for them is customer retention. Retaining customers in the technology retail industry is important as the technology industry continues to grow in the market as well. Loyalty programs for customers continues to be a point of the growth of the organization.
Rivalry among existing competitors- Best Buy competes with companies such as HHGregg, online retailers such as Amazon, and Wal-Mart’s tech department. Retaining customers keeps them away from the competition (Best Buy Co., Inc. BBY).
The first and most affective of the company of the five forces is “Rivalry among existing competitors”.
Supplier power- The suppliers for
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This increased the competitors, and made the consumers more powerful in driving costs down for the industry. Best Buy has adapted with using the price matching tool to preserve the customer retention.
Threat of a new entrants- A physical retain store attempting to enter the market does not present a threat for the company. The reason is due to the tough restrictions and current laws for a new retail store to grow in the industry. Although, an online retail does present a threat because there are so few barriers they need to avoid to start up. All the online entrants need is supplies of the product, and a well-designed website for consumers to use. Best Buy has attempted to counter this force with the development of their own online based retail site that sells in store and third party products.
The threat of substitution- This is also very low concern due to the customers moving toward online purchases instead. A substitute store in the industry is already at a disadvantage with Best Buy having physical and online stores
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The goes the same for the retail industry. Best Buy’s strategy to counter the fixed profits of the overall industry is to partner with some of its competitors to draw in new customers. The rivals that are mentioned above are also suppliers with Best Buy. Apple, Microsoft, and other competitors partner with Best Buy to maximize profits for each other. The limitation of the five forces analysis is due to the fact that a company’s strategy is to draw customers away from the competition, but the strategy to bring the rival into the store is the opposite effect.
Apple’s trademarked Apple Care is now sold at Best Buy, which used to be an Apple store only purchase. This shows that Apple is attempting to expand their own services outside of their own stores, while Best Buy uses the Apple products/services to increase revenue. Both companies are attempting to achieve the final goal of taking profit for other competitors of the industry.
Arce, N. (2015). Apple Partners with Best Buy to Offer AppleCare for Maces and AppleCare+ for Apple Wactch, iPhones, and iPads.