Hy-Vee Case Study

1. Identify the specific industry that your organization is in and then discuss the industry-specific environment that your organization is working within - these are Porters’ forces.Identify the forces and assess the strength of each of the forces within the industry. Explain how each force acts to create competitive pressure upon your organization. Decide the strength of overall competition (combined effect of all forces). Identify your organization’s major competitors and describe their strengths and weaknesses. Has your organization developed any strategic alliances or partnerships? If so, describe.

The specific industry that Hy-Vee is in would be the supermarket industry. An industry specific environment is defined as “The overall economic, regulatory, social and political conditions that affect all participants in an industrial market in a similar way and cannot readily be influenced by marketing.”(BusinessDictionary) Hy-Vee has a broad industry specific environment being a supermarket that offers many goods and services to its customers. Knowledge of the business market structure and the ability to analyze a company’s industry specific environment is essential for a business. It’s very important for businesses to continue to assess not only the competition but also the performance of there own organization.

The five-forces model of competition is a tool that’s used to evaluate the competitive dynamics in an industry. The five sources are threat of entry, the power of buyers as well as sellers, potential threats for substitutes, and rivals. The Threat of Entry for supermarkets especially those located in the Midwest are high. The most important factors in determining if there are threats to Hy-Vee directly correlates to the amount of potential competitors there are along with what resources these potential threats possess. Hy-Vee’s threat of entry is high for several reasons. There is a very big pool of competitors in the industry.  Hy-Vee not only has to compete with large corporations such as Wal-Mart, but also many smaller locally owned supermarkets that are present in their demographic area. One things Hy-Vee does have going for them is that new entrants will encounter cost and resource disadvantages.  New entrants will also have to find distributors, build a loyal network of potential customers, and find distributors that suit their needs.  These things are very possible for new entrants in the supermarket, especially on a smaller scale. New local, smaller, and family owned stores are very capable of taking business from a larger Hy-Vee with the right, and correctly allocated resources.

The power of buyers also poses a major threat to supermarkets and more specifically Hy-Vee. “Whether seller-buyer relationships pose a minor or significant competitive force depends on the number of potential customers that have sufficient bargaining leverage, and the extent to which buyers are price sensitive.”(Gamble) Buyers in the supermarket industry have a low cost of switching to competitors.  There are often many supermarkets that are accessible to individuals, many of which are in walking distance. Hy-Vee shoppers can switch from supermarket to supermarket at little cost.  This gives consumers a great deal of bargaining power when deciding what supermarket to spend their money at.

The power of sellers in the supermarket industry is low.  There isn’t a great deal of pressure coming from suppliers when purchasing goods for several reasons. Hy-Vee doesn’t specifically offer specialty products; this increases the number of places they can attain their goods from. Almost all individuals shop at supermarkets from time to time. This directly correlates with the number of suppliers that are able to offer goods to not only big, but also local businesses. Farming is a booming and very popular industry, especially in the Midwest where almost all of Hy-Vee’s stores are located.  There are many suppliers that are capable of providing the goods that a supermarket needs to run their business. It is these reasons why there are little switching costs for supermarkets looking to attain goods for there business.  Several competing suppliers also force them to keep costs relatively low.