Porters 5 forces Threat of New Entrants · Start-up costs · Big competitors already in industry Threat of Substitutes · Must eat and drink · Self sufficiency Bargaining Power of Supplier · many suppliers for industry · scarce resources Bargaining Power of Buyer · many producers · substitutes Competitor Rivalry · brand proliferation · lots of competition · bottles (Jurevicius, 2013) New EntrantsDue to monopolies beingillegal, there will always be the threat of new entrants.
However, the likes ofVit Hit and PepsiCo and Fanta are some of the main producers in the industryand to compete against such large and powerful firms would require highstart-up costs. The technology and infrastructure required to engage in themass production required to compete with existing firms are expensive and itmay not be worthwhile to enter the market as it would take a long time to gainestablishment in the industry and start earning profits as there wouldn’t be aquick turn over of produce initially in such a large industry. When Vit Hit wasfirst founded as ‘Vitz’ it is clear how even then how difficult it is to enterthe industry. It took rebranding and redesigning of the products andorganizational structure along with right timing for the company to take off.
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These combining factors It can be concluded that the threat of new entrants islow in the industry. LOW MEDIUM HIGH SubstitutesWhen looking at the industryof food and drinks, there is little threat of substitutions given that food andbeverages are necessities essential for living. Although there are many firmswithin the industry that produce similar and substitute goods there is notreally a substitute for the industry itself.
Being self-sufficient could beviewed as an alternative for the food and beverage industry as it would be theonly way to survive without purchasing products from the industry. For example,if someone reared their own animals for meat and meat products and harvestedtheir own crops and had a well on their property, then they could survivewithout buying any products from the food and beverage industry, they may beconsuming similar goods but they will have produced them themselves. LOW MEDIUM HIGH Supplier PowerAccording to Quickmba.com. (2018). The power of a suppliers depends on how many choicesof suppliers there are for an industry.
If there are many suppliers then thebargaining power of suppliers will be low due to the substitute suppliersavailable. This is the case for the food and drinks industry as the majority ofproduce used in the industry comes from agriculture and there is a huge numberof suppliers of such goods. Due to the nature of the industry the majority ofingredients used in products come from agriculture and as there are many peoplethat can supply these ingredients, the companies have a great choice of whereto source their ingredients. Due to their it being a single supplier, thebargaining power of supplies is weak with Vit Hit and it is easier to securesupply chains. However, if a raw material were scarce then the supplier powerfor tat resource would be high as there is a limited supply chain but there aremany producers looking for that resource for example if water is scarce thatbargaining power of water suppliers will be high.
LOW MEDIUM HIGH Buyer PowerIn this industry the buyerpower is strong as consumers can choose between similar food and beveragesproducts in the industry (Quickmba.com.2018). Buyer power lies with supermarkets as well as individual consumers.
Supermarkets buy and stock the products in the food and drinks industry and itwould not be very cost efficient for individual consumers to buy directly fromthe firms producing the good therefore, if distributers do not stock the goodsconsumers won’t buy them. Similarly, if consumers do not purchase these foodand drinks then supermarkets will stop buying them as they are not makingprofits from stocking them. It is clear that individual consumers and supermarketshave a proportional relationship, as individuals demand for a product falls, sodoes the supermarkets demand for it i.e. demand for product falls as does thesupply of the product.
The success of a business can depend on buyer power. Forexample, Vit Hit was not successful at first when consumers chose othersubstitute goods over Vit Hit. LOW MEDIUM HIGH CompetitionNot only are there otherenhanced waters in the industry, there are also less health oriented drinkswhich also offer consumers energy, such as soft drinks. There are many healthfoods on the market that offer the same quick supply of nutrients, vitamins andenergy as Vit Hit products only in bar form. According to Blair-White et al(2017) In 2009 Vit Hitreleased a new line of health bars but they didn’t sell well as the competitionlevels of health bars was too high. Producers compete by using attractivelabels, packaging and slogans.
In the case of Vit Hit the white labelcontrasting the bright coloured liquid in the uniquely shaped bottle helps theproduct stand out. Firms also compete by improving flavours of products andpromoting the health benefits of the product to make them more attractive.However, this product differentiation costs money and drives up prices whichthen makes it less attractive to consumers who don’t want to consume the drinkfor its health benefits or flavour but instead simply want a drink. LOW MEDIUM HIGH Bibliography