Question

Assume you want to open a new retail bookstore that carries both new and used books. You hope that you can also bring in authors to the store in order to sign their books. You can select any city you would like in which to locate the bookstore. Using Michael Porter's five industry forces as your framework, determine the viability of actually opening your bookstore.

Answer 1

Porter's 5 Forces - I would like to locate a new store in Mumbai

1. Rivalry among existing competitors- HIGH ( Already a lot of book cafe and book stores are operating in Mumbai and hence providing a USP is the key)
2. Threat of new entrants- HIGH ( Looking at the lifestyle of current generation and youth population of India, there is going to be a lot of new entrants for the following business model)
3. Bargaining power of Buyers: MEDIUM ( As conditions of the used books determine the price of the book, it is going to be medium. It won't be high as the prices would be competitive and there would be significant differences in prices for new and old books
4. Bargaining power of Suppliers: LOW ( Pricing of new books depend upon the publisher's demand and hence it can be negotiated while for used books it depends upon various factors like physical condition, edition of the book, time for which it will be borrowed)
5. Threat of substitute: HIGH ( With digital revolution at it's all time high, many online retailers and book publishers are providing their content online, and it will be a great factor for the success of business)