Question

Describe the Supplier Bargaining Power in the Organic Packaged Food Industry.

Include:  

Who are the suppliers?

Rate the force as Strong, Medium, or Weak and explain why you gave it that rating.

Threat of New Entrants

Answer 1

The organic packaged food industry which when compared to inorganic food products is highly costly and hence is usually meant for affluent class buyers.

Here, the bargaining power of the buyer is week because of the following reasons.

* The production cost of the organic food is comparably high to inorganic foods.

* The production of organic foods is usually done in limited quantities. This ultimately increases the demand for it.

* Inorganic packaged foods are available for those who can't afford the price of organic foods.

* They are supplied to the market to cater the needs of the niche market or  the affluent buyers.

SUPPLIERS

A supplieris a person or business thatprovides a product or service to another entity. The role of a supplierin a business is to provide high-quality products from a manufacturer at a good price to a distributor or retailer for its resale.

In case of organic food industry, the farmers are usually the suppliers.

THREAT OF NEW ENTRANTS

• Threat of potential entrants

It measures the difficulty for newcomers to enter into the industry. Factors to determine the barriers to entry generally include brand loyalty, excess production capacity, and governmental regulations.

• Bargaining power of buyers

This measures to what power consumers have in determining the prevailing price in a market. Buyers’ bargaining power is high when buyers are large and concentrated, and buyers’ price sensitivity is very high when there are many industry competitors and substitutes available.

• Bargaining power of suppliers

This measures how much a supplier is able to restrict the company’s business strategy. The supplier bargaining power is high when suppliers are large or concentrated. Purchasers’ price inelasticity is high when there are small alternative suppliers and when there.