Bargaining power of suppliers
Affect profitability since they might supply products at high cost. The higher the bargaining power of suppliers, the more costly it becomes for customers. The suppliers are powerful, and there are many buyers. SAB is powerful because they have more customers and they are more powerful than their substitutes.
Example: SAB should design standardised components that can be purchased from many suppliers.
Bargaining power of buyers
Consumers can also influence profitability. Their bargaining power relates to their ability to influence prices e.g. by forcing them down or increase features. Buyers include customers, distributors, or other manufactures.
Example: Alcohol buyers may typically include retailers (Venter, 2009:78). SAB have substitutes but they have more customers because of the quality of their products and the product cannot be compared to their standards in that case they become more powerful. The SAB customers are powerful because of the quality they get in the strategic market.
EXAMPLE: Tops liquor, pick n pay liquor etc. Emerging black consumption was the key to growth in SA. One of the growth drivers for beer producers in SA is consumers switch from mainstream e.g Castle, Black Label and Hansa.
The translation between the seller and the buyer takes place to create value for both parties, but if the buyer holds more economic power because of certain factors, the buying company’s ability to capture a large portion of the value increases and higher profits will be earned.
Threat of new entrants
The possibility that new companies may enter an industry and increase competition will reduce the industry’s attractiveness. New entrants may have significant resources that signal the ability to gain market share and influence profitability. When analysing this threat, marketers should examine the barriers to entry and the reaction of existing companies to new competitors. Present...