Dealing with Competitors in Five Forces Model
Bomo Albert-Oguara, Manager, Nigeria, Member
The 5 forces model basically deals with those forces that create the interplay of firm rivalry and how these forces shape competitiveness in the particular industry. Since you are dealing with supermarkets, the 'industry' is then the distribution/retail chain and the immediate rivals in the supermarket sub-category are all firms, big and small, your small corner shop, grocers are all rivals.
The intensity however lies within the chains like Tesco, Sainsburys, M&S etc, etc.
Like Bowdery said, concern yourself only with the industry players at an aggregated level, not the individual firms. To do that, aks questions such as:
- What will constitute a barrier for a firm trying to enter the supermarket chain business?
- Considering that chains such as Tesco and Sainsbury are already there... How easy will a new entrant enter the market?
- What level of concentration exists in the supply side?
- Are existing chains also suppliers? In other words, what level of backward integration exists?
- Is the market oligopolistic or not?
- What is the level of product substitution in the supermarket chain business? You have Tesco cornflakes competing for shelf space with known brands like Kelloggs.
- Supermarket chains are known to control the supply chain of their fresh produce lines such as tomatoes,green pepper, fresh fruits and flowers; with most of them acting as value chain 'Governors'.
The complexity of the models lies in the fact that a lot of backward and forward integration
takes place among the various players and this has blurred the lines of competition, thus making it more difficult for new entrants.