John Lewis Porter’s Five Forces Analysis. The level of competitive environment in Chinese market of department stores is best analysed with the application of Porter’s five forces model which specifies five individual forces that form the competitive environment in a marketplace.
The level of existing competition is intense in Chinese department store market with the largest market share divided between such companies as Lane Crawford, Lotte Mart, Maoye International, Mitsuokoshi, and New World Department Store China Limited.
Barriers to entry into the market. Chinese government has continually relaxed rules and regulations for starting businesses during the last several decades (Han et al., 2011), which has resulted in barriers for entering department store business lowered.
Customer bargaining power is high in Chinese department store market. This is caused by the high level of competition in the marketplace.
Threat of substitute products and services in China in relation to John Lewis department store is highly limited and this situation increases the level of attractiveness of the market.
Supplier bargaining power. Interestingly, “in China, the bargaining power of suppliers was once very large due to the shortages and the planned price system” (Zhuang et al., 2003, p.40). However, as the principles of free market economy are increasingly being adopted in China, supplier bargaining power is diminishing.
- Han, J., Liu, R. & Zhang, J. (2011) “Globalisation and Wage Inequality: Evidence from Urban China”
- Zhuang, G., Herndon, N.C. & Zhou, J.N. (2003) “The Transforming Structure of Cometition in China’s Retail Industry” Journal of Marketing Channels, Vol. 11(1)