Kohl’s Industry Competitive analysis – presentation

—Ease of New Entry

  • —History => Low barriers to entry due to low customer loyalty and moderate capital requirements (Riley 2012)
  • —Now => High barriers due to investments by large retailers to create economies of scale (Riley 2012)
  • Established distribution channels by large retailers => high barriers for entry (Riley 2012)
  • Trend towards consolidation thus increase barriers of entry (Riley 2012)
  • —Huge expenditures on marketing to enhance customer loyalty and increase entry barriers (Riley 2012)
  • But, low entry barriers for e-commerce ventures due to lower cost requirements compared to traditional stores
  • Therefore: Low threat for traditional establishment; high threat for e-commerce options

—Buyer’s bargaining power

  • —Relatively low because (Zackman and Folker 2009; Riley 2012):
    • —Individual customers not organized into groups.
    • Product differentiation & customer’s diverse needs => difficult to create a group with a high bargaining power
  • —But, increase in buyers power due to (Zackman and Folker 2009; Riley 2012):
    • —Availability of information to compare retailer prices thus shop from lower-cost retailers
    • Many choices for customers since many retailers will offer similar products.

—Suppliers’ power

  • —Low bargaining power due to (Richards 2010; Zackman and Folker 2009; Riley 2012):
    • —Consolidation of small retailers thus enhancing their purchasing power,
    • —High competition among suppliers thus reducing the ability of a single supplier to set market prices, or get exclusive brand agreements
    • Availability of low-priced imports,
    • Vertical integration by large retailers
    • Large retailer’s capability for backward integration
  • —Therefore => low supplier power due to emergence of large retailers with high purchasing power

—Substitutes

  • —Low threat of substitutes for low prices and convenience; i.e., multiple products in one store:
  • —Lack of substitutes for aspects such as apparel (Zackman and Folker 2009)
  • Increase in threat from customer resale e.g. websites that offer customers options to sell old products or products they no longer need (Zackman and Folker 2009)

—Competitive rivalry

  • —Very high competition due to (Zackman and Folker 2009):
    • —Similar products with little differentiation
    • —E-retailers increase the level of competition
    • Most retailers have both e-commerce and brick and mortar establishments
    • —Competition shifting from product to integrated services
    • Large competitors=> difficult to acquire competitors to reduce competition
    • —Market players include Macy’s, JC Penney, Kohl’s and Sears, with the top 10 companies contributing almost 95% of sales in the highly concentrated industry (Report Linker 2013).

Go to part five here.

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