Porter's Five-Forces' Analysis of the Spanish Olive Oil Industry

Threat of new entry is low because the barriers to entry are high. Newcomers to the industry would require an enormous amount of up front capital to set up the distribution networks and infrastructure, such as establishing hubs, and acquiring aircraft and a large amount of ground transportation vehicles (vans, trucks, ect). Economies of scale are significant and would deter new firms from entering because initial sales volumes would be low do to the fact that existing brands already have strong brand identification, and there are no cost advantages to entering, like government

A new firm needs to make a trade off between performance and compatibility by employing an evolution strategy (offering a migration path) or a revolution strategy (offering superior compelling performance). A firm also needs to make a trade off between being an open system or a closed system as open technologies are popular but rewards are not as desirable as a proprietary technology holder. By using these strategies, firms in network markets approach by using one of the generic strategies from performance play, controlled migration, open migration and discontinuity.

Primary assumptions to the theory include, high barriers to entry and exit, high sunk costs and imperfect knowledge of the market. In addition, this paper will analyze the company’s current standing in the market along with competitive strategies executed to grasp a greater portion of market share.

1.Discuss critically the competitive advantages of New World wine producers and contrast these against their Old World competitors.

B. Production Capacity: The year is 1993 and is the first year of operations for Calambra. Partnering with Gino Ambrano, a seventh-generation olive-oil presser of Sicilian descent, Calambra had purchased 800 gallons of Gino’s olive oil to test the market potential. Because the mission of the organization is to provide the highest quality, best tasting olive oil on the market, only Ambrano’s olive oil may be used for this venture. For personal

This attractiveness derives from the relative low threat of new entrants, low supplier and buyer

While bargaining power of buyers is ranked the least important of the five factors for Mondavi’s strategy, its importance should not be understated. One of the Wine is typically sold to wholesalers who then distribute to retail outlets. With the decreasing number of wholesalers and the consolidation of retailers, buyers negotiating power is increasing. It is difficult for companies like Mondavi to make consistent profits and maintain market share if they cannot keep products on retailers’ shelves.

Opportunities include huge market, no competition for at least three years, potential huge margin, good marketing strategy.

Each industry must have an idea about how to conduct an environmental scanning particularly the Porter's five forces. Each force may affect the profitability of an industry. These five forces include bargaining power of buyers, rivalry of competitors, threat of substitutes, threat of new entrants and bargaining power of suppliers. Cocoa industry uses these as an analytical tool to determine the competitive market.

Porter (2008) argues that the threat of entry “puts a cap on the profit potential of an industry … [and] incumbents must hold down their prices or boost investment to deter new competitors” (p. 81).

Another quality of perfect competition that may be overlooked, but is vital to this industry is the ease of entry into the market. Start-up franchises within this market structure can begin operating with relatively low initial investments (compared to other industries). This is not the case where monopolies are concerned. There are numerous barriers to entry into monopolistic market structures, capital being one of the most prominent barriers.

Threat of New Entrants – The threat of new competitors entering an industry is high when initial

To begin with, heterogeneity of capabilities and resources of firms, which is explained as “enduring and systematic performance differences among relatively close rivals”, provides a foundation of the resource-based view (Song, et al.,2006). The implication of this assumption is that core competence conveys the valuable and unique feature of products to customers. The RBV disagrees with the opinion that the resources are homogeneous; if homogeneity is assumed to be essential to develop a proper strategy, the strategy can be easily copied by competitors, which will ultimately result in the dissipation of above-normal rents. Conversely, the unique and fixed resources on hand will lead to outstanding performance and ultimately turn to be a competitive advantage, under the circumstances that sustainable competitive advantage is achieved in an environment where competition does not exist.

New Entrants: The possibility of New Entrants is supposed to be Low. The reason for this is that the entry barrier is very high in this segment, as it requires a huge amount

What is the advantage and the distinctive quality of firm when selecting the capability of a selected segment