Key Events / Case synopsis
The Sports Guy is an independent sporting goods store located in a small town outside the greater Toronto Area. The store is owned by Bob (“Rocky”) Rhodes, age 32 who has for many years been a high-profile personality in the local sports community. Ten years ago, Rocky decided to go into the sporting goods business for himself. Family members and friends provided some equity capital and the new business was incorporated, with Rocky owning 60% of the shares and his family members and friends 40%. The land package that Rocky bought consisted of two lots on a corner, the store was built on one lot; the other remained vacant. After 2004, the town grew and the area ...view middle of the document...
Apart from this, Rocky, the owner of the business has been a high-profile personality in the local sports community and is well-known to practically everyone involved in the local sports community, which gives his business credibility and reputation. Although his business is not profitable and currently a rather unattractive industry.
Porters Five Forces – Sports Good Industry
1. Supplier Power
In the sporting goods industry supplier negotiating power is possibly high, a main reason for this is because the market is regularly dominated by a few large suppliers rather than a disorderly source of supply. There is also reason to believe that the suppliers could carry out forward integration in order to obtain higher prices and margins as well as economies of scale. The suppliers could be identified as huge sport good manufactures such as Nike, Adidas, and so on.
2. Buyer Power
Buyer power is very likely to be high as at any given time a customer is able to switch to an alternative brand or store, they do not incur any cost in doing so. Buyers also have low margins and are price-sensitive, thus they look for the lowest prices and best quality. So therefore customers would tend to integrate backwards.
3. Threat of New Entry
The competition in a sports goods industry is relatively high due to the fact it is easier for other business to enter the industry. The lower barriers and high threat of new entrants could change major elements of the market environment such as prices and customer loyalty. This is bad for the industry as it could tend to not be stable and business who are already in and established in the industry may find this challenging at given times.
4. Threat of Substitution
There is a high threat of substitution in this industry as there are many possible substitutes such as the online stores, more established and well known stores, stores outside of the city and discount or wholesale stores. This again bad for the industry as smaller and unestablished business will be able to steal sales and customers from the bigger players, at the same time oversaturating the industry.
5. Competitive Rivalry
Competition between businesses in this industry is usually high. There are many companies who sell the same brands and goods, in other words there is not much differentiation between companies and their products, and therefore there is a lot of price competition. Players...