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Hi,
I find questions about that model pretty straightforward but I seem to made a mistake going through one of the past papers and I am not sure if maybe two different approaches would be possible
paper June 2013 Q2 –
When i attempted it I considered Customers/ Buyers as people of the targeted market of Eurobia, the solution suggests NESTA to be the Buyer?
I asked the question as to how much of bargaining power have customers in the target market have?
Would you know where did I go wrong with this?
Thank you
UrsulaYou were correct when considering that the customers in the target market. However, Nesta is also a buyer from its suppliers and can put pressure onto them also. For example, if Nesta took 80% of a supplier’s output, Nesta would have considerable bargaining power. So here the answer suggests that Nesta will take great trouble to get bargain hard with its suppliers.
Sorry for interrupting but i also have some issues with the examiner answer.The examiner suggests that nesta should go and exploit the growing market but I have suggested that nesta should Acquire one of the three discount shops as Nesta is not well recognised as survey suggest that only 5% people knew about nesta and 90% recognise the three discount shops.There may be barriers due to rapid expansion done by the three discount shops and they can make an alliance to keep a reduced price to keep new competitors away from the market.
Kindly help!
subsitutes:three discount shops
indirect subsitute: Supermarketbut in the answer the examiner is talking about shifting to internet for selling ambient goods.
I think you are also saying that Nesta should enter the market, but you are going further and suggesting that that is done by acquisition rather than organic growth. That might work fine if the price is right.
Entering the market via the internet could also work.
Often in these questions there is no single right answer and there are frequently pros and cons to each strategy. The way you argue your case is often more important than the conclusion.
Gromit but sometimes seeing a diferent answer is sort of demotivating!! Btw gromit i struggle in the conclusion area i just dont know what should i write when i have applied the whole model!!
I know alternative answers cause self doubt. However, in the exam, you will not see an alternative answer – so just have faith that you are correct!
The conclusion depends on the question asked. For example, if you are asked to advise on whether a takeover or subcontracting should occur, you have to come to a view based on your analysis. Different people can come to different legitimate views as they might, for example, have different attitudes to risk.
Sometimes no conclusion is necessary a you might just be asked to appraise an organisation’s strategic position. Generally the models used will generate a mix of good and bad news, but no overall conclusion might be needed. If a conclusion or recommendation is needed you will have to come to your own view on the balance of effects.
If you take bargaining power of customers to relate to Nesta’s actual retail customers, what comments can be made?
My view is that Nesta would be supplying very ordinary goods that would not command customer loyalty. The switching costs of Nesta’s customers would be very low.
No individual customer would be very strong, but Nesta will have to ensure that it competes on price with competitors to maintain a customre base.
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