Bargaining power: Nike
This article was about the market power of Nike based upon Five Forces. These forces are Competitive rivalry or competition (Strong Force), Bargaining power of buyers or customers (Moderate Force), Bargaining power of suppliers (Weak Force), Threat of substitutes or substitution (Moderate Force), and Threat of new entrants or new entry (Weak Force). Other competitors that are in the same market determine how Nike’s growth determined. Because of the high saturation of the market, it’s growth rate is rather small. Therefore, there is a very high competition for that small amount of growth. This keeps Nike on top of their game in terms of production quality and the like. This also means that Nike needs to keep its product quality and prices on a level equal to or better than its competitors.
Another aspect in Nike’s market driving bargaining power is its customers. Essentially, they can affect Nike’s power simply by choosing to buy other companies’ shoes. The same can be said for the power of Nike’s suppliers only except the suppliers set the price instead.
This relates very well to market power analysis. This is because we can essentially model this as a bargaining market. We can imagine each customer being the central node in separate markets with each company (Nike included) connected to that central node. Only one exchange can be made per customer. Essentially if we made a normalization between value and price for every company for the individual customer’s needs. This isn’t exactly the same because the customer is getting a full dollar in this scenario but these two scenarios are similar because the customer will get the product and one company will get his money. A similar set up can be made for each company and each supplier, which essentially functions the same as the above scenario.