The paper "Competitive Analysis of Trader Joe " is a great example of a management case study. This report focuses on the competitive analysis of Trader Joe where the report makes an in-depth analysis of Porter’ s Five Force Model to identify the industry trends and competitiveness of the same. The report then makes an analysis of competitive advantage offered and “ Sustainable Competitive Advantage” in terms of Trader Joe by making by relating it to Barney (2001) and Porter (2006) to provide readers with both practical and theoretical knowledge of the topic. 2.0 Porter’ s Five Force Model To analyze the intensity of competition which Trader Joe faces in the current scenario let us look upon Porter’ s Five Force model of industry competitiveness. The threat of New Entrants Trader Joe has an added advantage of Economies of scale which reduces its average long-run cost and enables it to offer superior quality goods at a lower price than its rivals.
The threat of entry of new entrants is medium as entry to the existing market of Trader Joe is either supermarkets being rebranded or health store transforming into supermarkets.
Further, there exists a possibility that competition may become more intense in the form of grocery stores like Whole Foods or Market Baskets. Further speciality stores and Target superstore could intensify competition. One of the major reasons of concluding the threat of new entrants as the medium is because Trader Joe is characterized of offering unique products which its existing rivals fail to do so thus ensuring competitive advantage to the company. Further, the customers of Trader Joe are very loyal to the company and there seems very little probability of the customers being swayed away by existing or potential entrants in terms of luring them with lower price or using discounted schemes. Bargaining Power of Buyers Bargaining power of Buyers can be characterized differently in terms of its different buyers.
Power of buyers in large volume is high as the variety of goods and services offered by its competitors within the same industry like Whole Foods and Grocery stores are immense. There is typically more than one food store located in most of the areas which give consumers a choice to make their preferred buying decision.
However, in terms of the individual buying power of the buyer, it is on the lower side as these stores are characterized by serving many individual customers where the individual power is almost non-existent. Further, the price elasticity of demand of the consumer product is low as the buyers have options of immense alternative products which could be purchased in other grocery stores, local markets and supermarkets. Bargaining Power of Supplier’ s Supplier’ s bargaining power is low as Trader Joe is into contracts with multiple suppliers operating on a worldwide basis which decreases the leverage of a particular individual supplier.
Further, the degree of control on the suppliers by Trader Joe is high as they operate in a smaller size than the rest of the supermarket giants with strict control over the number of SKU’ s in their stock. Further Trader Joe has been able to create its own brand recognition and customer loyalty towards its own labeled products which enable Trader Joe to easily switch over the suppliers without letting its customers know of the difference of in its products.
The company also indulges in signing secrecy forms with his suppliers ensuring that neither its customers nor his suppliers know who the actual producers are.