Using Porter’s five-forces model, briefly discuss the nature and strength of each of the five competitive forces effecting the snack food industry. What is the impact of the collective strength of the five competitive forces on profitability?
Porter’s five-forces model consists of five elements: buyers, suppliers, competitors, new entrants, and substitutes. Defining each of the forces in the Porter’s model, the strength and nature of each may be considered. Competition is characterized by the desire to dominate rival sellers. The competition in the particular industry is discussed. The increased competition encourages the sellers to implement various strategies for attracting more customers. The fear of potential new entrants is another force. No one in the industry wants to see new rivals; therefore, each company tries to create the conditions strongly unpleasant and inconvenient for new rivals. Another force in the development of the product is the possibility of emerging of an absolutely new product, which may substitute the existing ones. Supplier bargaining power is important as well. Having no choice may lead to higher prices on the raw materials, which do not influence price attractiveness of the product positively. Customer bargaining power is important as being produced for the customers, the companies seek for new ways to satisfy their tastes.
Considering the place of Porter’s five-forces model in snack food industry, it should be stated that it is a highly competitive industry. The possibility of new entrants is high. The rivalry among competing sellers is on the high level as well. To win in this competition, the companies refer to discounts, sales, promotions, and other specific techniques to attract more customers. Customer power is particular in snack industry. Having many competitors and high level of substituting products, companies try to make sure that their products meet the needs and tastes of many customers. Suppliers also have the influence on snack manufacturers, particularly in case of bargaining and supplier-seller collaboration. Therefore, Porter’s five-forces affect company profitability greatly, as each of them influences company performance.
Make a list of the driving forces operating in the snack food industry and make some conclusions about whether the likely impact of these driving forces on snack foods companies will be favorable or unfavorable.
There are a number of driving forces operating in the snack food industry. Competition from rival sellers, potential new entrants, substitute products producers, supplier and customer bargaining power are the main ones. Accelerated distribution is another driving force in the industry as the more retailers are supplied with the products, the higher number of the items is available for choice and the greater number of the products is going to be sold. The emergence of a totally new ingredient is another driving force operating in the snack food industry. People are attracted with the new items on the market. Having developed a new taste with the help of a new ingredient, the company is guaranteed to increase the sales and the number of customers. It is impossible, since "eat just one" strategy is another driving force. The more spots with snacks a person has on the way, the higher the possibility of a person to buy the particular product. One of the main peculiarities of the snacks is their highly expressed taste.
Having eaten one portion of any product with expressed taste, people usually want another one. Snacks usually do not help in cases when people want to eat. Having eaten a snack, people usually want to eat again just in a couple of minutes. The option of а healthy eating has become a recent trend. More and more people are interested in healthy nutrition; therefore, the production of healthy food is another driving force operating in the snack food industry.
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