Question

Conduct a complete analysis of the organic packaged food industry’s competitive forces using the “Five Forces Model of Competition”

Focus on the part of the industry that sell meals, entrees, and side dishes and snacks (not beverages or desserts)

1. For each of the five competitive forces, list what/who are the forces

2. Rate each force as strong, medium or weak and why.

6. Write a brief summary of your conclusions from this analysis and what it means for industry profitability.

Answer 1

Bargaining power of suppliers ( weak)

Any business requires inputs-labor, raw materials. The cost of your inputs can have a significant effect on your company’s profitability.

Contracts and positive relationships with suppliers and producers are another way a small agricultural

producers can manage the uncertainty and power of suppliers. Food processors can buy agricultural produces from many, weak small and medium farmers. The bargaining power of suppliers is fairly low.

Bargaining power of buyers (strong)

The power of buyers describes the effect that your customers have on the profitability of your business. The transaction between the seller and the buyer creates value for both parties. But if buyers (who may be distributors, consumers, or others) have more economic power, your

ability to capture a high proportion of the value created will decrease, and you will earn lower profits.

• The bargaining power of buyers is fairly high .

• In cases where products have a slight differentiation and are more standardised, the switching cost is very low and the buyers can easily switch from one brand to another.

• It has been proposed that customers are attracted towards the low prices.

Threat of new entrants ( weak)

The threat of new entrants is the possibility that new firms will enter the industry. New entrants bring a desire to gain market share and often have significant resources. The most important barriers to entry are: capital requirements, government policy and regulations, access to inputs

and distribution, economies of scale and other cost advantages switching costs and brand identity. It is

known that a production process for a specific good or service exhibits economies of scale over the range

of output when average cost declines over that range.

This industry is not an easy business to start because it is capital intensive.

Threat of substitutes ( Strong)

Products from one business can be replaced by products from another. If you produce a commodity product that is undifferentiated, customers can easily switch away from your product to a competitor’s product with few consequences.

Rivalry among competitors

Threats of rivals ( strong)

It can be reduced by employing a variety of tactics. To minimize price competition, distinguish your product from your competitors’ by innovating or improving features. Other tactics include focusing on a unique segment (overseas country) of the market, distributing your product in a novel channel, or trying to form stronger relationships and build customer loyalty.

The intensity of competitive rivalry in the industry is extremely high.

CONCLUSION

By using porter 5 forces analysis for the case of food industry implementation, the results show that the competitive profit in the industry is low. Several strategies
need to be proposed in order to achieve the better competition positioning for the industry. Yes, some
sort of globalization is inevitable because larger companies will require access to larger globalization
markets in order to remain profitable. However, globalization will not necessarily occur at all level of
economies because smaller companies will tend to be more successful if they focus on local market
requirements.

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