Porter’s Five Forces-The Kroger Company
| Industry force | Strength | Justify your determination with examples | ||
| High | Medium | Low | ||
| The threat of new entrants | x | I believe the threat of new entrants is high because the retail industry is broad, thus creating opportunities for different types of retailers. Access to distribution channels in the retail sector is also easy, thus attracting small retailers who start with a few retail outlets and gradually grow their client base through e-commerce and exploring other distribution avenues (Ellis, 2018). Brands are also entering the e-commerce retail industry to increase customer reach, thus increasing the flow of new entrants that may pose competition to Kroger. Therefore, Kroger Company needs to identify opportunities that may attract new entrants and focus on how it can create a competitive advantage over new entrants when taking advantage of them. | ||
| Power of buyers | x | I believe the power of buyers is high because there are many retailers in the industry that customers can choose from based on the retailer’s ability to meet their needs and preferences. According to Richards & Liaukonytė (2022), switching costs in the retail industry are low because the price difference is relatively low. The e-commerce retail sector has also increased the power of buyers because they have access to a wide range of products from many retailers. Therefore, Kroger Company has to maintain customer satisfaction and create customer loyalty to avoid losing customers to other retailers, including online retailers offering similar products and additional services such as delivering the purchased products to the customer’s address. | ||
| Power of suppliers | x | I believe the power of suppliers is medium because they depend on the retailers’ supply demand. Suppliers also have less control over the price of their supplies because they are more than the buyers. Switching costs for retailers are also low because the products offered by the suppliers are less differentiated and reasonably standardized, thus making it easier for retailers to switch suppliers. Suppliers are also expected to provide reasonable pricing because the industry’s profits are closely connected to the profits generated by suppliers. Therefore, Kroger Company should maintain suppliers offering high-quality products at the company’s preferred price. | ||
| Power of substitutes | x | I believe the power of substitutes is low because there are few substitutes in the retail industry. Existing substitutes are highly priced, thus reducing the buyers’ likelihood to switch to substitute products. The nature of products in the retail sector is also the same, and only the form of retailers can be changed. Kroger company has also established customer loyalty among its customers, thus reducing the likelihood of customers purchasing substitute products because they cannot get the same utility from the substitute products as they derive from the company’s products. Therefore, the company needs to update its products based on customer needs and preferences to create a competitive advantage. | ||
| Rivalry among competitors | x | I believe the rivalry among competitors is high because the retail industry is rapidly growing with the increased demand for goods locally and internationally. Therefore, there has been an increase in large and small retail companies in the retail industry offering a wide range of products to create a competitive advantage (Dan et al., 2014). Although the Kroger Company’s competitors are few, they have a significant market share in local and global markets, thus increasing competition for the company. Rivalry among competitors is also high because the products offered by retail companies are highly differentiated, and every market player focuses on different sub-segments, thus increasing the customers’ psychological and economical switching costs. Therefore, Kroger Company should focus on customer loyalty to create a competitive advantage. | ||
| Complements | x | I believe Kroger Company has many compliments because it has established a large customer base in the United States with high customer loyalty. | ||
ReferencesDan, B., Qu, Z. J., Liu, C., Zhang, X. M., & Zhang, H. Y. (2014). Price and service competition in the supply chain with pure play internet and strong brick-and-mortar retailers. Journal of Applied Research and Technology, 12(2), 212–222. https://doi.org/10.1016/s1665-6423(14)72337-5 Ellis, S. J. (2018). The Third Retail Revolution. Oxford Scholarship Online. https://doi.org/10.1093/oso/9780198769934.003.0006 Richards, T. J., & Liaukonytė, J. (2022). Switching cost and store choice. American Journal of Agricultural Economics. https://doi.org/10.1111/ajae.12307 |
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Question 
Complete the table below. For the company, you’ve decided to assess in week one and determine the strength of each of Porter’s Five Forces and the complements.
Porter’s Five Forces-The Kroger Company
Justify your determination with examples.
| Industry force | Strength | Justify your determination with examples | ||
| High | Medium | Low | ||
| Example | x | This is why I believe it is medium. | ||
| The threat of new entrants | ||||
| Power of buyers | ||||
| Power of suppliers | ||||
| Power of substitutes | ||||
| Rivalry among competitors | ||||
| Complements | ||||
| References: | ||||
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