Porter’s Five Forces
Porter’s Five Forces refers to the tools that determine and analyze the weaknesses, strengths, and competition in the business industry. It brings forth the five forces that determine the competitive intensity and attractiveness of an industry in terms of pf profit-making.
Competition in the industry. This force determines the intensity of competition in the industry and the capability to attract the customer’s attention. The company can achieve what it wants when the competitive rivalry is low, thereby gaining higher sales and profits. Tesco’s market would be threatened when there is a similar number of competitors, the same rivals, influence, and product offering.
New entrant’s threats. The ability of other companies or organizations entering into the market industry. A position of a company in the market is relatively affected by the less time that competitor takes to register into the market and be a strong competitor in the market. Tesco Malaysia is currently facing low competition from potential competitors. This ability cultivated by the need to have high capital investment to be able to compete with the current leading competitor (Grundy, 2006). Therefore, to overcome this scenario, they must have proper strategical plans then can enable them enter the market and compete.
The Supplier’s bargaining power. This power describes the ability of suppliers to bring an impact to the distribution and supply of products. Large number of suppliers in the market profoundly affect the ability of a company to switch from one supplier to another. Tesco Malaysia has low bargaining power over its suppliers. Tesco Malaysia has been so beneficial to the supplier by offering them a certain and a vastly growing market for their products.
Customer’s bargaining power. This bargaining describes how customer are able to bargain for the products or services. The number of buyers and customers, importance to the company and their cost determines the cost to switch from one organization to another. Tesco is basically experiencing fairly high bargaining power from the customers. With the current technology, customers can compare the price through online retail shopping, and with that, they can easily buy the goods they want. Therefore, there is no customer loyalty.
Product substitute or service moderate. Substituting a product or service can be a significant threat to the organization since it leads to a change in prices. Tesco has been in a pricing war with their competitors including Giant and Carrefour by printing leaflet with compare prices from different hypermarkets to allow the consumer to compare the pricing of the same product from different hypermarket and know that Tesco Malaysia is the best choice for the lowest price product This is to attract the attention of consumer by providing products with the lowest price and influence them in having the impression that they produce in Tesco Malaysia has the lowest price.