A five-forces analysis is very useful in helping identify the five forces that shape the business industry. There are two things are directly correlated with each other: attractiveness and profitability, therefore we must complete a five-force analysis. The five-force-analysis include rivalry, potential of new entrants into the industry, power of suppliers, power of customers, and substitution threat. Within this industry, there are three main wholesalers: Costco, Sam’s Club, and BJ’s Wholesale Club. Competitive Rivalry These companies attempt to attract consumers by discounting prices in large quantities at various warehouses. These customers are required to pay a membership fee in order to take advantage of these membership prices. Since these warehouses are similar, the competition is intense based on prices and different selections. The competitors in this industry offer little to no differentiation since they offer similar products at almost the same prices. The degree of competitive rivalry is low. …show more content…
There is an increased number of buyers within this industry causing for switching costs to usually hover in the moderate range. Since there are already substitute raw materials available in the markets, substitute raw materials remain having increased ratings. Overall, since the consumer demands competitive prices, the market is created for the consumer and supplier by the wholesaler. This, in turn, causes the supplier to meet the needs of the customer by having wholesale prices in the consumer market. Buyer Power There are certain demands that must be met if a company would like to stay in business. Usually customer’s purchases play a huge role; however, individual purchases have little effect on the large sales volume that wholesalers will produce. Usually, the customers have little to no bargaining power in comparison to the sales volume. The Threat of Substitute Products or