Business Strategy

Porters Five Forces Model

Michael Porter developed the five forces model in 1979. These five forces allow any company to identify the industry strengths and weakness that can affect their entrance. The five forces are Rivalry, Bargaining power of customers, Threat of new entrants, Bargaining Power of suppliers and Threat of substitutes.

 

Rivalry

         Rivalry determines the impact existing companies have over others in the industry.  Rivalry is very high because this industry has growth 2.5% between 2010-2015, which means big companies such as Bed Bath & Beyond are competing for a greater market share. There are also retail stores that sell many of the same products such as department stores, specialty stores, discount stores and online retailers. This industry has low exit barriers meaning that any company can leave the industry very easy.

Bargaining Power of Customers

         Bargaining power of customers determines the impact that customers have over the industry. Bargaining power of customers in this industry is very high because there is a low level of product differentiation and customers are very sensitive in terms of industry pricing. There is also extensive information about home furnishing products that can be found very easy through the web or magazines; which increases the bargaining power of customers.

 

Threat of New Entrants

         Threats of new entrants determines how challenging is for a company to enter the industry. Threat of new entrants in this industry is medium because of the high level entry barriers that companies need to have such as legal, financial resources, solid distribution network in order to enter and compete in this industry. Also consumers are becoming more brand loyal and prefer to buy products from well-known companies.

Bargaining Power of Suppliers

         Bargaining power of Suppliers determines the impact that suppliers have over the industry. Bed bath & beyond have low Bargaining power of suppliers because there is too much competition between suppliers and there is a low cost in changing them. Bed Bath & Beyond purchased its merchandise from 8,300 suppliers and has no long-term contracts with them, which decreases the bargaining power of suppliers.

Threat of Substitutes

         There is a medium threat of substitutes because there is a very limited number of substitutes such as the DIY (Do it yourself) furniture which has a low quality and productivity because the buyer needs to have extra tools and time to assemble the product.

Competitive Strategy

Bed Bath & Beyond is industry-wide based company because it operates in United States, Puerto Rico, Canada and Mexico. Bed Bath & Beyond has a differentiation Strategy. The company developed a differentiation strategy by providing great customer service and creating loyalty programs such as Bed Bath & Beyond e-Club that offers customers discounts and special promotions.

Value Chain

A value chain of a company is a sequence of activities in which are created to construct a value for the customer. In such ways, the process of a value chain activity decides the expenses and the profit outcome. The value chain has multiple activities that are implicates to operate a business. The activities are inbound logistics, marketing and sales, outbound logistics, operations, and service. Bed Bath and beyond is primarily a marketing and service company that provides satisfaction customer service towards their customer needs.