Swot Analysis of Woolworth - Essay Example

Threats:
- Increased competition from the various retail sector, as well as other segments such as discounters, category killers, and catalog-based retailers, cause more strains to the market.
- Stiff competition from supermarkets increasingly involving themselves in non-food ranges and making ventures to a smaller scale, reducing the sales of retailers as they prove to be more convenient.
- A rise in the oil prices and a varying demand for oil, hence having an effect on their edge over their competitors of selective pricing.

Porter’s five force analysis constitutes an outline for scrutinizing the competition levels in the industry. Michael Porter devised the five force model to illuminate the microeconomic factors that affect the performance of a firm in an industry. The five forces as outlined by Michael Porter are; supplier’s bargaining power, consumer’s/buyers’ bargaining power, threats posed by new entrants, threats from substitutes, and the rivalry within the industry.

Porter argued that the easier it is for firms to enter the industry the higher the probability of increased competition. However, some factors limit threats from new entrants.  Some of these factors include consumer loyalty, initial capital requirements, scarcity of the available resources, and many others.

This refers to the influence that suppliers have on a business. If a single supplier can have eminent influence to affect a firm’s margins and volumes, then the supplier bears significant power and vice versa. Some reasons why a supply can have power include; lack of close substitutes, limited suppliers in the market, the value of the product to buyers among other reasons.

Buyers’ bargaining power refers to the influence of consumers on a firm. If one consumer possesses sufficient power to alter the margins of a company, they hold a commanding power. Some of the reasons why consumers might have power include: the availability of information to buyers, limited buyers in the market, and the amount purchased among others.

The availability of close substitutes is a real challenge to a firm. Some of the factors that affect the threat of substitutes include; buyer preference for substitutes, switching costs, technological changes, and many others.

The forces of competition in an industry determine the profit margins and the existence of a firm. Stiff competition in the industry results in low returns and vice versa.