Question

Prepare Porter's five force model of dairy industry in United States.

Course- managerial economics

Answer 1

The five force model by Porter aims at analysing the competitive nature of the industry. It includes the following elements.

• Buyer's power of bargaining - In US the bargaining power of the consumers is generally high. This is because different types of products are available in the market and there is no conformity that the consumer will go for a certain product. Also the prices of the product also varies. They may substitute a high cost product for a low-cost one.
• Suppliers power of bargaining - The bargaining power of the suppliers is also high since they require sufficient quantity of milk and that too with good quality to produce the different products.
• Threats created by new entrants - As there is high demand for the products there is always higher possibility of new entrants in the industry
• Threats created by substitutes - Since diary products cannot be easily substituted by any other products such threats are low.
• Rivalry between the firm's within the industry - It is high because there are a large number of firms operating in the industry.