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in Grade 12 by Master (810k points)
Karen's Events specialises in catering for weddings. Despite Karen's high prices, she has many customers due to excellent service and stylish decor.      It was easy to start her business, as she only needed a trading licence and       a small amount of capital. Karen's Events buys all her products from Thuli Ltd, who is the only provider of wedding decorations and materials in this industry.  Sammy's Party Planners, who operates in the same area, offers similar services at affordable prices.

Questions: Analyse the market environment of Karen's Events using the Porter's Five Forces model.

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by Master (810k points)
 
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Porter's Five Forces model.

Power of buyers:

  • Karen needs to assess how her buyers/customers can influence prices.
  • If Karen's customers have a wider choice of services, they have more power to influence prices and terms of sale.
  • Despite Karen's high prices, she has many customers√ due to excellent services and stylish décor.

 Threats of new entrants to the market/Barriers to entry.

  • The power Karen's business has in the market will depend on how easy it is for new competitors to enter the market.
  • It was easy for Karen to start her business because it required a small amount of capital/only a trading licence.
  • Karen's market can attract potential competitors, because of low barriers to entry.
  • It may be difficult for small businesses to enter the market as Karen has a large market share/many customers.

Competitive rivalry.

  • Businesses rendering the same/similar services may have an impact on Karen's market.
  • Karen may be stronger than Sammy's Party Planners, as she renders excellent services.
  • Despite Karen's high prices she has more customers than her competitors.
  • It is easy for Karen to withstand competitive rivalry as there is only one competitor.

Power of suppliers.

  • Karen must assess the power of the suppliers in influencing the market.
  • Thuli Ltd has more power over Karen' Events, since Thuli is the only supplier in the market√/Karen does not have a choice but to buy from Thuli's Ltd.
  • Karen will have to accept Thuli's terms and conditions, e.g. Thuli's Ltd can determine the quantities and the prices of the inputs supplied.
  • Thuli's Ltd can easily increase the prices of her services.

Threat of substitutes/Alternatives.

  • Substitute services are different services that at least partly satisfy the same needs of the customers and can be used to replace one another.
  • Combined service packages/deals on various functions may be available at more affordable prices.
  • Some customers may prefer to organise traditional wedding ceremonies on their own√, which may not require the services of Karen's Events.

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