The Threat Of New Entrants

1725 WordsNov 6, 20147 Pages
3.2.3.1 Threat of New Entrants The threat of new entrants is low in the natural food industry. Economies of scale decrease long run average costs which generate lower prices for customers and give a firm the ability to expand. Significant economies of scale for the natural food markets, including Whole Foods, are high, with the ability to create large volumes with low costs. The barrier for both entering into and exiting from the industry are strong. Entry to the natural food markets is either supermarkets changing their corporate images or health retailers moving into supermarkets. The natural food industry is currently dominating, which expands through new store openings with an assertive approach in its founding years. Organic food markets diminished their expected comeback to increase volume by choosing from incumbents through mergers and acquisitions. It is doubtful for local farmers to become a strong force and enter the market individually since the majority is not willing to invest in getting authorization with the government. It is easier for major companies to enter the market because they can finance the kind of goods the consumers are looking for. Network externalities are strong while there is no impact in spite of government protection of incumbents on profitability. 3.2.3.2 Power of Suppliers The power of suppliers is medium to high for natural food industry. Several organic food markets have a strong network of suppliers. Supermarkets are developing the

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