Week 1 MBA 5030 Porters Five Forces

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Webster University *

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5030

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Economics

Date

Feb 20, 2024

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docx

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2

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This week we discussed Porter's Five Forces. Let's discuss these in relation to retail industry. Think of the structure of the consumer retail industry in 2020 and what it might have been like 20 years ago in 2000. This will require you to do some cursory research. For each of the five forces, was the force stronger, weaker or about equal in 2000 than 2020.  Why?   The primary consumer retail industry difference in 2000 versus 2020 is the explosion in growth of online/ecommerce. This has affected Porter’s Five Forces as follows: 2000 2020 The US Commerce Department reported Retail Sales in 2000 of $268.04 billion dollars and in 2020 it was $524.06 billion dollars. Technological advancement, explosion of ecommerce and globalization have made this a very competitive industry. In analyzing the Retail Industry in 2020 utilizing Porter’s Five Forces, it appears that the industry is a less attractive industry than in 2000 (Low Entry Barriers, High Rivalry, High Bargaining Power of Buyers, and Many substitutes). Below are comparisons of Porter’s Five Forces between the two time periods: Threat of new entrants in 2020 compared to 2000 is higher due to technological advances that allows anyone to sell anything at anytime from anywhere in the world. As such, there is low entry barriers in this industry that allows more sellers to provide their goods/services.
Bargaining Power of Buyers in 2020 is stronger than in 2000 as the explosion of ecommerce and availability of brick-and-mortar shops has expanded consumer’s access to goods. Bargaining Power of Suppliers in 2020 is weaker than 2000 since pricing strategy is difficult to implement when competing against “low cost leader” so have to look at other means of increasing profits by lowering input costs or quality. Threat of Substitutes are high as consumers have a choice from low price (Walmart) to mid-price (Bloomingdale’s) to luxury/high price items in the retail industry. Competition (Rivalry) is high as department stores, direct-to-consumer companies, wholesale clubs, Big Box stores, local stores, national stores, international stores and plethora of online sellers are all competing for consumers. Link: https://www.multpl.com/us-retail-sales/table/by-year
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