snervo_5forces.docx - According to the report U.S consumers...

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“According to the report, U.S. consumers had made an average of 1.6 grocery shopping trips per week in 2018” (Statista). Weather you shop at Winco, Safeway, ACME, Giant Eagle or Public they play in the same sandbox. Everyone in the US uses this industry making the environmental conditions sensitive and keeping the companies in the industry on their toes.The five force analysis of the grocery industry shows that external industry environments effect the business and how they remain profitable. With low profit margins “The supermarket business is a low-margin industry, with the average profit margin for supermarkets typically ranging from 1 to 2 percent. However, natural, organic and gourmet foodmarkets enjoy higher averages from 3.5 to 6 percent” (Azcentral). Grocery stores get their profitfrom volume of sales. We will now analyze the retail grocery industry according to Porter’s five forces.1.Competitive rivalry (Medium): Grocery Chain & Mass Merchandiser2.Power of buyers (High): Households 3.Power of suppliers (Medium): Brands 4.Threat of substitutes (Highest): Eating Out and Meal Kits5.Threat of new entry (High): Online Shopping Competitive Rivalry is a Medium threat the competitors in this industry consist of grocery store chains like Public and Kroger and mass merchandisers like Target and Walmart. The companies are constantly competing on price, ad wars, innovation, service and quality. The main reasons for this is low switching cost and number of companies in the industry. Consumers can chose to buy their groceries at another company with out any cost. In some cases one competitor and put a stop to the competition like Winn-Dixes did to Food Lion “When your competitors agree thatsuch competition will be more profitable than competing on price, they’ll tend to go along. That is precisely what happened when Winn-Dixie followed the Big Star supermarket chain in North Carolina and announced that it, too, would meet or beatmutual rival Food Lion’s prices. After two years, the number of products among 79 commonly purchased brand items at the supermarkets had more than doubled.

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