NESTA

Assess the attractiveness, to NESTA, of entering the discount fixed-price retail market in
Eurobia. (16 marks)
Professional skills marks will be awarded for demonstrating commercial acumen when
applied to the competitive nature of the industry in particular. (2 marks)

Assessing the attractiveness, to NESTA of entering the market is a micro analysis, which helps NESTA to
understand the specific environment in which discount fixed price retail industry operate and helps also to
understand NESTA is having competitive advantage and the areas where the company can build competitive
advantage.

Inorder to assess the market in Eurobia, it would be better to use Porters 5 forces model. In which it will helps to
understand the 5 forces ie, Barriers to entry, Bargaining power of customers, Substitute products, bargaining
power of suppliers, competitive rivalry.

Barriers to entry: Due to the long term economic decline and prolonged economic recession, customers who
were using high end branded products will start buying the undifferentiated discount fixed price product since
their purchasing power would decrease due to the recession. The competitors already exist in the market has a
13% growth in revenue overall even though they are small in size compared to NESTA. This give additional
advantage of being the largest company in the market to NESTA.

Bargaining power of customers: In this industry the customers wont be looking for any brand and some
competitors are already in the market. As per the survey 90% customers are aware about the competitors, all
these may put pressure on price NESTA is going to offer in this market. But the market is growing so NESTA
could make profit on economies of scale.

Substitute Products: The conventional supermarket chains could be substitute for customers those who prefer
better parking facility and wide range of stocks. However the largest supermarket store has annual revenue of
42,500m which is far less than NESTA’s revenue of 120,000m. That makes NESTA an advantage of being a
large company in the industry with cash reserves which could be used to lease significant number of retail
outlets through out the country.

Bargaining power of suppliers:

NESTA can bargain for better price as the suppliers are manufacturing these products specially for the
companies like NESTA in the country.
Lots of empty stores are available for cheap rent which will help to reduce the cost further.
Flexible rent plans are also available. These are all favorable to NESTA.

Competitive rivalry:
The total revenue of all of its competitors makes less than 1% of NESTA’s annual revenue. This shows how
big is NESTA compared to its competitors in Eurabia. In addition the company can utilize its multi national
expertise to get the competitive advantage, still the company should concentrate on marketing as NESTA is less
familiar in the market.

While considering the overall factors NESTA has the competitive advantage in many areas.