Essay Example on Competitive Advantage: Leveraging Porter's 5 Forces Model

Introduction

Being aware of competitors and their product and services is critical for every business organization that aim to achieve a high level of competitive advantage in the market place. Irrespective of the size of a company, whether local, small or big, competition, there is a direct influence on profitability. Many organizations use Michael Porter's Five Forces model, which is a fundamental tool used to determine whether or not a company can be profitable when compared to other businesses in the market place. This paper, thus, discusses the degree of rivalry Kohl's currently facing within the retail industry, a product line that is subject to the high degree of substitutes, the role of the buyer and supplier as well as threats to entry from competitors.

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Kohl's Corporation

Kohl's Corporation runs the Kohl's company. It is one of the largest American department store retail chain with over 1100 locations in the United States. Moreover, in terms of revenue collection, it amongst the U.S. department store company by retail sales. JCPenney is one of Kohl's main competitors in the retail industry.

The Degree of Rivalry Face by Kohl's Company within the Retail Industry

The degree of rivalry amongst firms in an industry is the level to which companies with the market exert pressure on one another, thus limiting each other's profitability. If the level of rivalry is stiff, the competing industries are trying to take market share as well as profit from one another. Thus, there is a decrease in profit among firms in the industry.

The level of profit potential in the existing firms and the competitive environment is thus affected by the amount of competition in the retail industry. For instance, the competitors in the industry are aggressively pursuing each other's target markets and pricing of the product. Therefore, there is a great level of competitiveness, which makes the industry more competitive and thus decreases revenue for the existing businesses. On the other hand, a low level of rivalry leads to a less competitive industry, and thus a rise in profit for present business firms.

However, for the case of Kohl's company, the low Intensity of Rivalry has not been experienced due to the high number of competing firms in the industry, large variety, and high aggressiveness of retail firms. Therefore, Kohl's company must maintain its aggressiveness to continue being competitive in the retail industry. Moreover, Kohl's must keep growing to maintain and even raise its competitive position as a major global retailer.

The Product Line that is Subject to a High Level of Alternatives

The likelihood of customers moving to alternative products in response to quality and price levels is high, where substitute products exist in a market. As a result, there is a reduction in the desirability of the market as well as suppliers' bargaining power. Kohl's provides a wide range of goods and services which have few alternatives. Moreover, most of the goods offered are readily available. The low variety and higher costs of jewelry and beauty substitutes pose a weak threat of substitution against Kohl's (Snipes & Pitts, 2015). For instance, the high number of expensive and low variety of jewelry and beauty substitutes makes it hard for consumers to change from products accessible from Kohl's stores.

The Role of Buyer Power

The bargaining power of buyers is high when they can move freely from one supplier to another. However, a large population of consumers imposes insignificant pressure on suppliers, who are competing firms. Kohl's faces a low level of buyer's bargaining power in the retail industry as a result of a wide range of consumers, large population, and Small size of separable purchases. Therefore, individual purchase has an insignificant influence on the company's marginal profits (Goodman & Remaud, 2015, p.120). Also, large population and Higher buyer diversity make it impossible for customer s to have a collective pressure on the company. As a result, the buyers' bargaining power has a weak force to impose pressure on Kohl's Company.

The Role of Supplier Power

The fewer the suppliers in the market, the more bargaining power they have. Thus, when the supplies are many, businesses are in a better and stable position. The suppliers' bargaining power has a weak impact on retail diligence since there are numerous suppliers. Based on Porter's Five Forces analysis, therefore, Kohl's experiences weak force of the bargaining power of suppliers due to the following external factors; high obtainability of supply, stiff rivalry amongst the merchants, and a large number of suppliers. Furthermore, Kohl's corporate social responsibility strategy supports in management of suppliers' impact on the industry.

Threats to Entry from Competitors

Lucrative markets attract new entrants, thereby posing a threat to profitability and rising competition on existing firms. To maintain a competitive advantage in the industry, Kohl's must deal with the threat of new entrants in the market place. Even though the existence of giants like Kohl's, the new entrance of retail businesses is easily attainable. This is because small merchants can enter the market and compete based on factors such as specialty, locality, and buyer convenience.

In conclusion, according to Michael Porter's Five Forces exploration, small retailers have low costs of doing business when compared to larger firms, thus making it possible for new firms to compete with Kohl's company (Jayaraj & Dharamraj, 2016).

References

Bashir, M., & Verma, R. (2017). Why business model innovation is the new competitive advantage. IUP Journal of Business Strategy, 14(1), 7. Retrieved from https://www.researchgate.net/profile/Makhmoor_Bashir3/publication/316644311_Why_Business_Model_Innovation_is_the_New_Competitive_Advantage/links/5a4f02eda6fdcc7b3cda8858/Why-Business-Model-Innovation-is-the-New-Competitive-Advantage.pdf

Goodman, S., & Remaud, H. (2015). Store choice: How understanding consumer choice of 'where' to shop may assist the small retailer. Journal of Retailing and Consumer Services, 23, 118-124. https://doi.org/10.1016/j.jretconser.2014.12.008

Snipes, R. L., & Pitts, J. (2015). Running with the big dogs (part a): A competitive forces and strategic analysis of the running specialty store industry. Journal of the International Academy for Case Studies, 21(3), 37. Retrieved from https://www.abacademies.org/articles/jiacsvol21no3.pdf#page=43

Jayaraj, A., & Dharamraj, A. (2016). Competitive advantage strategies adopted by rural retailers in the Coimbatore district. Journal of Arts Science and Commerce, 7(3), 102-107. Retrieved from https://www.academia.edu/27877071/COMPETITIVE_ADVANTAGE_STRATEGIES_ADOPTED_BY_RURAL_RETAILERS_IN_COIMBATORE_DISTRICT