Porter’s Five Forces Porter’s five force analysis can be considered as an important strategic analytical tool that helps an organization to impact of the external competitive factors on business performance. This assignment will conduct a Porter’s five force analysis for Tesco Plc. Tesco Plc. is one of the leading UK based multinational retailers. This particular study will elate Tesco’s theories to Porter’s five forces theory. Buyers’ Bargaining Power Recent financial crisis and global economic recession affected the economic environment of several developed and developing countries around the globe. Therefore, global consumers are trying to consume high quality and differentiated products in economic price level.
Low disposable income and affected bargaining power are forcing consumers to shift towards a low-priced retail brand. On the other hand, intense market competition and high market saturation are influencing global consumers to choose cost effective brands and products. Therefore, it can be stated that threat of buyers’ bargaining power is high for Tesco. Suppliers’ bargaining Power Number of suppliers in global retail market is increasing at a rapid pace. Several retail organizations can choose cost effective and efficient suppliers to source raw materials and deliver products to end customers.
High competition in suppliers’ market helped Tesco Plc. to choose cost effective and efficient suppliers. Moreover, the management of Tesco Plc. adopted and implemented advanced technology in supply chain and operation management process to reduce the stress and level of effort of suppliers. Therefore, it can be stated that threat of suppliers’ bargaining power is low for Tesco Plc. Threat of New Entrants Global retail market is highly saturated as well as competitive. Therefore, it is highly difficult for the new players to grab the market share and customer or business cli9nt base of other leading market players.
In addition to this, high legal entry barriers and requirement of huge initial business capital can hamper the profitability of new firms. Therefore, it can be stated that the threat of new entrants is low for Tesco Plc. Threat of Substitutes Threat of substitute is low for Tesco Plc. as current market demand and customer trends are influencing leading organizations like Tesco to adopt and implement aggressive strategies in business operation processes. Other small and medium supermarkets used to provide substitutes of several products that are offered by Tesco.
However, effective implementation of differentiation stagey and introduction of loyalty or club cards for potential customers helped the organization to minimize the risk of substitutes (Ryans 188). Degree of Industry Rivalry It has been discussed earlier that global retail industry is highly competitive. In addition to this, several organizations within the retail chain industry are trying to develop and implement unique strategies in business operation process in order to gain potential competitive advantages.
For example, being one of the leading organizations Tesco Plc. has adopted and implemented cost leadership business level strategy in business operation process in order to back the affected purchasing power of people (Davies 85). But, there are other organizations too that have implemented similar strategy or differentiation strategy in business operation process to overcome the critical impact of external competitive factors. Looking into these facts, it can be stated that degree of industry rivalry is high for Tesco. Works Cited Davies, Adrian. A Strategic Approach to Corporate Governance. London: Gower Publishing, 2001, Print.
Ryans, Adrian. Beating Low Cost Competition. New Jersey: John Wiley & Sons, 2005. Print.