Porter’s Five Forces and its Application in Tesco Shop

Porter’s Five Forces is a model used in the analysis of an industry within which a business is operating in. The model is also used in the development of business strategies. This model was developed by M. E. Porter. The first force in the model focuses on the threat of new players in an industry (Porter, 2008). According to this force, a market which is profitable will eventually attract new players. The entrant of new players will result in decline in profits for the firms already in the industry. The second force discussed in the model is threat of alternative services or products. The third force focus on bargaining power of the buyers. This tends to be the ability of the buyers to put a seller under pressure. Another force discussed in Porter’s model is on the bargaining power of a firm’s suppliers. The supplier’s power depends on the availability of substitutes. The last force focuses on competition intensity that a firm is faced with in an industry. It helps in determining the competitive advantage of the firm over other players in the industry.!Tesco shop can make use of Porter’s model in a number of ways. To start with, the model can be used in reducing the bargaining power of the shop suppliers. In the case where there are few suppliers, suppliers of a firm will have a lot of bargaining power. Suppliers with too much bargaining power may pose a challenge to a firm, whereby they may overcharge for their supplies, reducing the firm’s profit margins. Thus, it is important for the shop to come up with strategies aimed at reducing supplier’s bargaining power such as entering into contracts with them. The model can help the firm to identify the substitute suppliers and other strategies such as product differentiations that can be critical in reducing the supplier’s bargaining power (Porter, 2008). In addition, Tesco shop can apply the theory in gaining competitive advantage over its main competitors like Wal-Mart. The theory can be used in identifying the strategies used by the other firms to increase their market share and enable Tesco to come up with better marketing strategies that will give it an advantage over its rivals in business.!Another way that Tesco can use the model is in investing in programs aimed at the satisfaction of its customers to reduce the impact of various substitutes available to its customers. Thus, given that Tesco is operating in an industry where the threat of alternatives is high, it can use the model to identify factors that may increase the threat of substitutes on the firm. As a result, the management of the shop will be able to invest in programs aimed at enhancing the satisfaction of customers concerning their products to avoid them going for substitutes.!Tesco has been concentrating too much in the home market of the UK, failing to invest in markets in other parts of the world. On the other hand, its main competitor Wal-Mart has invested heavily in other markets across the globe, giving it a competitive advantage over Tesco. Therefore, the management of Tesco should expand its market beyond its home country in order to increase sales revenue in the future. In addition, Tesco needs to come up with strategies aimed at building customer loyalty to it products by building brand equity and product differentiation to reduce customers going for other substitutes available in the market. On the other hand, Tesco can make use of the model to reduce the bargaining power of its customers, especially those who buy the most crucial products in the shop.

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