Executive Brief summary
The fine art market by which Saffronart runs is notoriously cyclical with booms accompanied by inevitable busts. The ideal issue this faces may be the uncertainty of where the art market is heading. The problem is that Saffronart simply cannot extend the sources of competitive advantage to markets outside India and modern universities of artwork. For this reason, Saffronart is recommended to vertically combine in India by going into the primary market and contending with galleries and dealers. This remedy is ideal and actionable in India if Saffronart uses its sources of competitive advantage. Market Analysis
The fine art market is successful as most pushes as buyer power, dealer power, danger of new entrants, threat of rivalry, and threat of substitutes are low. Customer Power: Medium/Low
Buyers will be wealthy individuals who consider their social status among the elite individuals of their society crucial. Thus, they may always be willing to pay a high price pertaining to fine art of the dominant universities. In addition , market products are really customized, and customers are not able to produce the merchandise themselves. Likewise, customers purchase in little volumes, although still drastically impacting Saffronart's total stock (Saffronart simply sold roughly 1000 items by the end of 2005) (Khaire and Wadhwani, exhibit 9). Supplier Power: High
Suppliers are art galleries/dealers and get exclusive access to the artists and the works that they represent. Suppliers can produce demand for particular art styles by building up a particular art collection to deliver a message to end users of what institution of fine art is prominent or trending. The case claims that, " prices climb when museums buy instances of particular schools of fine art. вЂќ (Khaire and Wadhwani, pg. 4). So , suppliers have significant power in the profitability of the industry simply because they influence demand, and therefore, value. In addition , suppliers offer items that are not substitutable or offered at any other gallery.
Note that even though supplier electrical power is large, " a thriving supplementary market is necessary for the existence of a very good primary marketвЂќ (Khaire and Wadhwani, pgs. 3-4). As a result, suppliers inside the primary market will not drive profits down in the extra market as the only approach galleries succeed is if companies win as well. In fact , percentage revenues that suppliers accumulate depend on secondary market product sales (33%-50%) (Khaire and Wadhwani, pg. 3). So , we are able to dismiss the simple fact that large supplier electricity usually signifies unprofitability on the market. Threat of recent Entrants: Low
New firms will find it difficult to establish interactions with galleries and museums and artists with no popularity or track record. In addition , there exists little incentive achievable firms to enter since there are large first capital costs (a one painting might want to use more than $100, 000, but does not always sell easily). Competitive Competition: Low
Boundaries to entry are excessive (refer to threat of new entrants), and those with no established reputation will discover it difficult to ascertain relationships with galleries and customers on the market. In addition , quit barriers are high seeing that firms cannot easily annihilate, exterminate stock of $100, 000 paintings. Yet , entry boundaries are much more than exit limitations, so danger of rivalry is low.
Threat of Substitutes: Low
Firms do not have unique alternatives, signature art pieces or perhaps " must-haveвЂќ works sinceВ different fine art gives a specific sense of traditions that is non-existent with other alternative luxuries for example a Rolex view or luxurious car. This kind of also applies to other artworks, as most high-quality artists may replicate their particular work many times. Firm Analysis
Saffronart's approach is to sell off high-priced distinctive modern Indian art to international and domestic clients via online auctions lasting 2 - 3 days. Using a team of 26 employees and five tech smart individuals interested in art, Saffronart implements a differentiation strategy. That is, rasiing customer...
Citations: Khaire, Mukti, and Daniel Wadhwani. В Saffronart. com: Bidding for Success. Harvard Business Assessment, 2010. Print
Ghemawat, Pankaj, and January Rivkin. В Creating Competitive Benefits
Porter, Jordan. В What can be Strategy?. Harvard Business Assessment, 1996. Produce
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