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Competitive Environment of Hypermarket Industry

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Introduction

INTRODUCTION The case study below will be accessing the competitive environment of hypermarket industry using Porter's Five Forces, as well as its competitive advantage strategies. 1.1 What is Hypermarket Hypermarket is basically a combination of supermarket and department store. It is a huge retail facility which provides a wide range of products under one roof. It attract customers by allowing them to satisfy their routine shopping needs, from food and other household items, to clothing and appliances in one single trip. The concept of hypermarket is to focus on high quantity but low margin sales (Dibb & Simkin, 2001). In Malaysia, some of the biggest players in hypermarket industry are like Carrefour, Giant, Jusco and Tesco. Other hypermarkets that are famous around the world are like Wal-Mart, ASDA, and Sainsbury's. They are usually selling various products at a very low price, but in high volume. 1.2 What is Porter's Five Forces Porter's Five Forces is developed by Michael E. Porter of Harvard Business School in 1979. It is a framework for industry analysis and business strategy. It studies how the five forces impact on an industry, and explains how the internal and external factors of an industry are effecting the competition within it. The five competitive forces that determine industry profitability are bargain power of buyers, bargain power of suppliers, threat of new entrants, threat of substitutes, as well as rivalry among existing firms. A successful business is to find out everything you can about your competition and industry dynamics, which refers to the commercial exchange among Porter's Five Forces (Trump & Gordon, 2007). ...read more.

Middle

Jusco Hypermarket's core strategy is to accelerate the shopping center development. They channel their resource towards attractive, integrated commercial facilities which attract the customers (http://www.jusco.com.my). By applying this strategy, Jusco will be able to minimize the risk of losing potential customers when there are new entrants. 2.4 Threat of Substitutes A substitute product is one that performs the same function as the industry's product. Substitute's product may appear to be different but they serve the same function as the industry's product. Substitutes in effect place a ceiling on the prices that companies in the industry can charge. If the price of an industry's product rises steeply, consumers will likely to switch to the substitutes. Since hypermarkets provide a wide range of products, there are no particular substitute products in this industry. The threat of substitutes appears when there are a lot of substitute shops or specialized shops where customers can purchase a particular product. For example, hypermarkets sell clothing but customer may purchase clothes from boutiques; hypermarkets sell food but customer may buy foods from other food stores. Other than that, there are also some convenient stores that sell the same range of products with hypermarkets but in a smaller scale, like the 7-Eleven. These specialized stores and convenient stores are considered as substitutes for hypermarket industry, and thus the threat of substitutes is very high in this industry. In hypermarket industry, the threat of substitutes is very hard to avoid as there are too much substitutes. ...read more.

Conclusion

4.0 Conclusion According to the research above, it is seen that Porter's Five Forces does apply in all types of businesses and industries including the hypermarket industry. Porter's Five Forces allows a firm to understand which of the forces are affecting their business. In order to gain the competitive advantage status and protect itself from the competitive threats such as the substitutes and new entrants, a firm should quantify which of the forces are affecting them and then choose the appropriate strategy, improve their weakness and strengthen their opportunity. Firms facing vigorous competition should continuously strive to reduce costs, boost product quality, raise productivity and develop innovative products. Reference ANON. (n.d.). Industry Attractiveness. Retrieved April 24, 2009, from www.brs-inc.com: http://www.brs-inc.com/models/model116.asp Dess, G., Lumpkin, G. T., & Eisner, A. B. (2003). Strategic Management. McGraw-Hill. Dibb, S., & Simkin, L. (2001). The Marketing Casebook: cases and concepts Edition 2. Cengage Learning EMEA. GIANT. (2009). About us. Retrieved May 2, 2009, from www.giant.com.my: http://www.giant.com.my/about_us.html Hamermesh, G. R. (1983). Strategic Management. Harvard Business Review. JUSCO. (2009). Corporate Philisophy. Retrieved May 3, 2009, from www.jusco.com.my: http://www.jusco.com.my/juscohome/html/aeon_v2/oa/oa_corp_philosophy.php Lynch, R. (2003). Corporate Strategy 3rd edition. Prentice Hall. Material, M. Peng, M. (2006). Global Strategy. Thompson. Porter, M. E. (1998). Competitive Advantage:Creating and Sustaining Superior Performance. The Free Press. Porter, M. E. (1998). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press. Rapley, P. (2005). Business Review. Five Forces Analysis . Trump, J. D., & Gordon, E. M. (2007). Trump University Entrepreneurs 101: How to turn your idea into a money machine. John Wiley and Sons. ?? ?? ?? ?? ...read more.

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