BU481 Lecture Notes - Lecture 13: Switching Barriers, Delivery (Commerce), Costco
BU481
Case
Industry
• Groceries
• Supermarkets
• US
Industry Value Chain
• Farmers => suppliers => wholesales => retailers => customers
Porter’s 5 Fores
• Supplier power is low for many because there are many suppliers, they have perishable items,
buyers are big, locked into contracts but it is medium for some CPG and other companies with
higher power
• Buyer power is high because loyalty is low, switching costs are low, and differentiation is low
• Threat of entry is low because the location is key, there is a low cost of supplies – contracts,
brands marketing power, access to distribution channels, size, saturated markets, industry is
experienced and data-driven
• Rialry is high eause there are ay players, argis are thi, it’s a lo groth idustry, prie
competition, low differentiation, commodity products
• Substitutes: dining out instead of buying groceries, convenience and drug, grocery delivery
olie, farers’ arkets, Walart, Costo, Shoppers
Industry Success
• Need to be differentiated to win
• Need to target a niche market
• Cost reduction is key
• Establish customer loyalty
• Location
• Size – better to be big
PEST
• P – labelling regulations, nationalized trade policies increasing cost of imports, lower taxes
• E – real estate prices increasing, substitutes increasing (share of wallet impact), minimum wage
rates increasing affects costs and rivalry
• S – grocery delivery for people who are too busy, trend for healthy, organic foods
• T – shift toward self-scanning and cashless lanes, ecommerce
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