Essay about Confectionary Porter Five Forces

642 WordsDec 6, 20113 Pages
The Five Forces Model was developed by Michael Porter in 1979 as a tool to analyse and classify an industry as well as identify profit potential areas in an industry. The model uses five forces of the industry to help identify three major aspects of an industry; competition, profitability, and attractiveness of the industry Rivalry among existing firms in the confectionery industry is very high + gain market share from their competitors + creating new products, changing existing products, or marketing with special offers + Companies in this industry are constantly developing new products to release into the market which creates competition to become the leader in innovation as well as cost and sales Threats of New Entrants (Low)…show more content…
Name branding also plays an important role in this because the buyers may not recognise the name or know anything about smaller companies’ quality of product. Bargaining Powers of Buyers (High) The two key factors that determine the degree of power of the buyers are: Price Sensitivity and Relative Bargaining Power. Price Sensitivity It deals with how far the customers are willing to bargain on price Customers in the confectionary industry include both merchants and actual consumers Firms must have a goal of maintaining low costs; they are forced to compete on price Higher price sensitivity leads to higher bargaining power for the buyer. Relative Bargaining Power A buyer’s bargaining power is determined by the number of customers. Also, the number of substitutes and the ease of availability to get those products determine relative bargaining power This bargaining power is another reason for the competitive prices of the industry, giving the low cost provider of a product the edge of the competition. Bargaining Power of Suppliers (Low) Bargaining power of suppliers determines how a firm will control cost and profits Firms with a large number of suppliers and substitutes have more bargaining power than firms with a limited number of suppliers. Suppliers have more power when there are fewer companies and fewer substitutes Suppliers for the industry have little power over price due to the amount of substitutes available in the open market.

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