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Porters Model

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Bargaining power of Supplier

Bailey’s Woodworking has little or no revenue to negotiate any reductions on bulk purchases and this leaves them in a poor negotiating position. The use of teak as its premier raw material will create a disadvantageous position and while alternatives are used the teak is creating a competitive advantage as a more superior product different product. The bargaining power of suppliers is therefore low although the market is not saturated with providers the cost of switching suppliers is not high because it is price stimulated rather than quality.

Bargaining power of the Buyer

In the house hold industry the customer has many choices but Bailey had a reputation of best in class for product quality. The product however has been at a slightly higher price and could be sourced from competitors. In the commercial market the buyer has considerable leverage with the tendering process and often causes the bids to be lower than the regular pricing used by the companies. Companies even bid below material cost in order to gain reputation with major companies. Bailey does not need to practice under-pricing since it has a superior product. Therefore the buyer had power since the cost of switching is low and there are alternative suppliers.

Threat of Substitutes

In this industry competition from retailers are present. So prices should be competitive in nature. In this market product for product elements exist since customers just want furniture, most times commercial customers gravitate to the cheapest price as they may not be very much concerned with the quality since a substitute can serve the same purpose.
Threat of new entrants
The treat of new entrants to compete with Bailey is low because of the monopolistic composition of the industry. Each of the ten firms competing in the industry offer different services and there is…...

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