The Rivalry Among Existing Firms: High

Jonathan Nahous

October 4, 2011

Assignment 2

Sears Holdings

26B

The rivalry Among Existing Firms: High

This describes the intensity of competition between existing firms in an industry. (2) The rivalries in this industry are in action between Kohl's Corp, Macy's Inc, The TJX Companies Inc, J. C. Penney Co., Inc, Sears Holdings Corp and Nordstrom Inc, as well as a few others. They all carry similar products such as clothing, cosmetics and household items. (5) Companies have to jockey for position to add more diversity to their firm to attract customers away from their competitors. Firm rivalry can be seen when a company's action has a resulting effect on its competitors. More recently, they have tried to reduce the cutthroat pricing competition by offering frequent flier points, memberships and other special services to try and gain the customer's loyalty. (4) Slower industry growth rate means more intense competition for fewer customers.

The global department stores sector has posted fluctuating rates of growth over recent years, with decline felt in 2009. Recovery is expected in 2010, after which the rate of growth will remain at a steady pace throughout the remainder of the forecast period. (1) The slow market growth for the retail market means that firms must fight each other for market share. Companies can only grow by stealing customers away from their competitors. The way these companies were introduced and developed shows that there is diversity among the rivaling firms. As firms develop different philosophies and goals there is greater possibility for mavericks and for misjudging rival's moves. Rivalry is volatile and can be intense. (6)

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The Threat of Substitutes: Medium

The threat of a substitute is when a product is similar and can also satisfy the same need as the original one. A possible substitute for shopping in department stores may be choosing specialty stores instead. (1) A specialty stores sells one type of product, as opposed to a department store, where you can find everything in one convenient location.

The Bargaining Power of Buyers: Medium

The power of buyers is the impact and the amount of pressure that customers can enforce on an industry. The buyers for the retail/department store industry would be individual customer or anybody who shops at the location. Department stores generally sell a diverse range of products, such as: tools, clothing, electronics, jewelry, etc, increasing their customer base. (1) This industry has a wide variety of potential customers, mostly individual buyers, which considerably weakens buyer power.

Bargaining Power of Suppliers: Low

Any industry requires materials such as labor, components, and other supplies. Suppliers of merchandise to department stores include manufacturers and distributors. (6) Large companies buy from a large number of suppliers, ensuring their reliance