week 5

Threat of substitute products

Hmv.com is as open to the threat of substitute products as much as any other business. Fortunately for hmv it has long been established as one of the major businesses of its kind in both Europe and Asia. Hmv has two major competitors which offer only substitute services but identical products; this keeps the market competitive both online and in store.

The threat of the entry of new competitors

In order for a new competitor to be able to compete in this market they would need to launch their business on a global scale, this is almost completely unfeasible due to the shear amount of money it would take. Due to the way the music industry is going the amount of music being sold as hard copies is dropping more and more. This therefore opens the door to business like i tunes which are entirely online and distribute no hard copies. However music has become a very small side of HMV.coms revenue with the majority being generated through dvd and games consoles.

The intensity of competitve rivalry

 As mentioned previously in this post, and others, hmv.com has two main competitors(play.com and zavvi.co.uk) hmv and zavvi are not so competitive when it comes to price as they are both reliant on mainly store based sales, and with their stores more than likely being close together in every major shopping town. This tends to keep the prices similar in these two business and they try to compete more through innovation and marketing. Play.com on the other hand are an entirely online based business and compete alot more through price as they have less overheads to pay.

The bargaining power of customers

Straight up bargaining with hmv.com is never going to happen. Prices are set by the company and thats what has to be paid. Being unable to bargain online is over come by the ability to shop around through a vast range of suppliers, shopping around via the internet greatly increases your chances of finding the same product for a better price. This being the case prices is likely to be forced down through increased customer knowledge and price transparency.

Bargaining power of suppliers

Suppliers of products to hmv.com are the same suppliers that supply all other similar businesses. It would be unfair for these suppliers to charge different prices to different companies for the same product. This means that the suppliers could use this as a source of power over these businesses. As the companies cannot get these specific products from anywhere else they may find this source of power pressurizes them into operating in accordance with the suppliers wishes