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Industry and Company Analysis - strategy of management - Assignment Example

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In the convenience store sector, the entrance barriers are low: there are no specific patents involved with creating a convenience store and it is very simple to set up an independent effort…
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Industry and Company Analysis - strategy of management
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Download file to see previous pages Customer loyalty is not really an issue in this sector as convenience stores will sell the same or similar produces across the board, leaving no buyer switching cost (IBIS World Market Research, 2011b).
The second force is the threat of substitute services. The biggest threat to the convenience store sector is supermarkets, which have reported an annual growth of 3.4% in the last 5 years (compared to the -0.4% of convenience store sector). This is because of a general move towards supermarket sales in general, plus many of the supermarket chains entered into the convenience store sector. There is little to no cost to the consumer to change to a substitute service, increasing the threat.
The bargaining power of the customer is dependent on many factors, including the location of the convenience store and surrounding options. However, in many cases (particularly in urban areas) customers will have a price sensitivity that may cause them to move to another rival chain. The buyer volume is much lower than for supermarkets, which means that the convenience store sector can be more sensitive to changes in customer power.
The bargaining power of suppliers in this sector is interesting, because many of the companies within the convenience store sector will be using the same suppliers. This is because many stock brand name goods. This means there are strong distribution channels and almost no supplier competition. The impact of inputs on cost is high, but will affect all areas of the sector, plus the competing supermarkets (IBIS World Market Research, 2011b).
The intensity of competitive rivalry is interesting in this sector. Whilst there are advertising campaigns for 7-Eleven and the other major convenience store chains, the main choice for a customer is the location and ease of access to the store. This means that much of the competitive rivalry in the sector is accumulating property in convenient ...Download file to see next pagesRead More
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