Question

What is the collective strength of the five competitive forces facing the three North America-based wholesale clubs (Costco, BJ's, and Sam's Club)?

Answer 1

Collective strength of five forces which has been determined by Michael porter in respect to three North America best wholesale clubs are as follows-

A. Barriers to entry and exit- Three competitive companies are at an advantage because of the difficulty of new firm entering the industry and they have a complete economies of scale and scope due to size and volume of their sales by buying and selling more on a larger scale with low cost. There is a very few company with this ability to enter the industry so this is having a high competitive advantage in entering and exit.

B. Threat of substitute-the threat of substitute is another factor because the service is not offered by another companies so there is no threat of substitute when we are analysing through the porter 5 forces.

C. Bargaining power of the buyer is another force which is working in the favour of the industry because buyer can not negotiate the price and the reason customer come to wholesale club is that they are attracted by the already low price and the value of buying in bulk so it is having another competitive advantage according to bargaining power of the buyers when it comes to porter 5 forces.

D. Bargaining power of suppliers is another factor which is more favourable opportunity as various clubs of a only a percentage of the products so there is a bargaining power on the part of the supplier and the industry is not able to to have the upper hand while dealing with its suppliers so it can be said that these industries are not having the bargaining power of suppliers and suppliers are having The upper hand while determining the porter 5 forces.

E . Rivalry among the existing player is not a critical factor because all the three companies sales have remained almost consistent and the power is among all the three companies, so there has not been a switching off of leadership so it can be said that rivalry among the existing player is another factor which will be working in advantage for these three companies according to porter five forces.