Power Of Promotion

Strategy making process for business existing in a particular industry involves the study of many factors in the industry. These factors, when studied together, shape up an overall context for an organization in an industry. To determine strategy for existence and profitability of an organization, the management should analyze the industry and its structure and how they change with the changing environment. Analysis of bargaining power of customers or buyers determines how much buyers can influence the demand/supply function, prices, profit margins and the quality of products. Customers can exercise such power when they are in large number or they use to buy a product in large quantities. The suppliers can exercise their bargaining power when they have large number of customers but they are fragmented. In some cases where the suppliers are aware of the fact that supplies or the input product have no substitute, they easily demand high prices for the supplies. An industry normally exists with a number of producers producing a particular type of product for a market. Therefore an environment of competition forms between these producers and their market shares are affected with the performance of their competitors. Alternative products or services offering the same or higher benefits to the customer are known as substitutes. Customers tend to switch to substitutes products when there is cost to benefit ratio for the substitute product is high than the current product used by that customer. New entrants can easily enter an industry and distort the existing distribution of market share and price equilibrium if there lesser barriers to entry. The development of the corporate strategy can be done in accordance to exploit the structure and variables of an industry so as to decide about the entry an exit to any market, choose between products and services to offer, maximization of profitability, growth and market share.