Department Store Industry Analysis in Mexico
Mexican Department Store Industry The department store industry in Mexico functions just like the majority of department stores around the world. They target the middle to upper class people with money to spend on popular brands, food and entertainment. While the department store chains in many countries tend to focus on one line of products (e.g., clothing), the department stores in Mexico have diversified products and services that helps to decrease direct competition, but it also makes it more difficult to predict a competitor’s next move. As the middle class population grows in Mexico, the market becomes more attractive, but many possibly new entrants are kept out by the high barriers of entry.
Porter’s Five Forces Assessment
…show more content…
Buyers The buyers have little bargaining power in the department store industry because each department store caters to varied segments with few substitutes. The consumer that goes to Saks Fifth Avenue will purchase products for status and other middle class consumers will find less expensive attire and brands to suit their needs at another department store. While some of the department stores offerings overlap to some degree, the largest competitors in Mexico generally avoid specific overlapping. For example, Liverpool tends to sale more electronics goods in their stores and Grupo Sanborns focuses on food and gift shops. The department stores diverse offerings allow them to capture the markets potential without having to contest over buyers. On the other hand, if none of the stores offer what the customers want, they may take their money across the border or go elsewhere to purchase their desired product, but this wouldn’t necessarily force department stores to change their strategy.
Summary Overall, the department store industry in Mexico is a moderately challenging business to be in. The threat of new entrants is not high at present, but with NAFTA signed and an economy that is beginning to start growing again, it is possible to see new competitors in the industry assuming that they can come in and establish scale relatively fast. Industry competitors tend to follow innovation so there is