Question

Porter five forces model food processing industry

Answer 1

1.

Threat of New Entrants:
The threat of new entry is quite high: if anyone looks as if they’re
making a sustained profit, new competitors can come into the industry easily, reducing profits Profitable markets that yield high returns will draw firms. The results is many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition).
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Capital Requirements (low)
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Economies of Scale (low)
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Absolute Cost Advantages(high)
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Product Differentiation (high)
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Access to Channels of Distribution (low)
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Governmental and Legal Barriers(high)
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Retaliation (low) 2.

Rivalry between Established Competitors (low): For Food processing sector, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. For most industries, the major Buyers are Weak in food processing industry. Producers threaten forward integration - producer can take over own distribution/retailing Significant buyer switching costs - products not standardized and buyer cannot easily switch to another product. Buyers are fragmented (many, different) - no buyer has any particular influence on product or price .Producers supply critical portions of buyers' input - distribution of purchases 3.

Bargaining Power of Suppliers (low): Also described as market of inputs. Suppliers of raw materials, components, and services (such as expertise) to the firm can be a source of power