Scribd
Upload
654 views6 pages

Five Force

The document discusses Porter's five forces analysis framework and its application to analyze the ice cream industry competitive environment for Havmor, an Indian ice cream company. The five forces include threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and rivalry among existing competitors. For Havmor, the document analyzes each of these forces as moderate to high intensity based on factors such as availability of substitutes, supplier dependence, large buyers, and competition from established players.

Uploaded by

Priyal Shah
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
654 views6 pages

Five Force

The document discusses Porter's five forces analysis framework and its application to analyze the ice cream industry competitive environment for Havmor, an Indian ice cream company. The five forces include threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and rivalry among existing competitors. For Havmor, the document analyzes each of these forces as moderate to high intensity based on factors such as availability of substitutes, supplier dependence, large buyers, and competition from established players.

Uploaded by

Priyal Shah
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 6

Five Force Analysis on Havmor

Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.

Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.This five forces analysis, is just one part of the complete Porter strategic models. The other elements are the value chain and the generic strategies.

Porter's five forces is based on the Structure-Conduct-Performance paradigm in industrial organizational economics. It has been applied to a diverse range of problems, from helping businesses become more profitable to helping governments stabilize industries.

Buyer Power
Buyer power is determined by various factors such as switching costs, the relative volume of purchases, the standardization of the product, elasticity of demand, brand identity, and quality of the products. On one end are the large institutional buyers i.e. big hotels and restaurants which ask for discounts, extended credit periods and the other end are small retail outlets like general stores which have no power to negotiate with the firms. The power of buyers is relatively high when buyers are large, consisting of individual customers, grocery stores, convenience stores, and restaurants nationwide. Since retailers purchase ice cream products in large quantities, this gives buyers substantial leverage over price. Customers are able to substitute one brand of ice cream to another at any point in time. There are many ice cream products to choose from, so the buyers cost of switching to competing brands is relatively low. Havmors strategy must include strong product differentiation so that buyers are less able to switch over without incurring large costs. Havmor upholds a strong brand identity in the Gujarat (Ahmedabad) market. It is perceived as having more innovative flavors in every three months and also having a higher quality. Thus, it is a strong point of differentiation.

Supplier Power
The suppliers to the ice cream industry include dairy farmers, paper container manufacturers, and suppliers of various flavorings. Factors affecting the bargaining power of suppliers include the threat of forward integration and the concentration of suppliers. There exist numerous potential suppliers of ingredients. The ingredients provided by each supplier are not unique or greatly differentiated. Furthermore, ice cream manufacturers are able to switch between suppliers quickly and cheaply. Also, many of the suppliers viability is tied to the well-being of large, established companies. Therefore, the bargaining power of suppliers of ingredients is rather low. As Havmor purchases the milk from different farmer societies therefore, a certain power is vested in the hands of the farmer societies.

Threat of Substitutes
There is no perfect substitute to ice creams because of its nature. However, many substitute products are available within the dessert and frozen food industry (cookies, pies, cakes, chocolates, soft drinks) which are basically food items consumed as sweet and which are also cold and refreshing in nature. Since substitute products are readily available and attractively priced, the competitive pressures posed by substitute products can be considered moderate.

Threats of New Entrants

Economies of Scale :
Amul and many other players enjoy economies of scale, thus it is difficult for Havmor to match by its competitors. It is because of this reason that Havmor is a regional company which has not grown or flourished to a national level.

Cost and Resource advantages :


Products under the brand name Havmor has a very good reputation at domestic level. Here, the raw material procurement is very difficult for the new entrants. Consequently capital requirement is also high. Still new entrants are emerging such as domestic and international players. So the threats of new entrants are moderate.

Brand Preferences and Consumer Loyalty:


The barriers to entry within the ice cream industry are moderate due to the brand preferences and customer loyalty towards the larger and more established companies. There is an immense level of Brand Preference of Havmor in the minds of the people in Ahmedabad.

Technology:
Inability to match the technology and specialized know-how of firms already in the industry: The technology used by Havmor is imported from U.S. and Chicago. It is a state of art technology. To get such technology, a firm would require a huge amount of resources.

Industrial Rivalry:
The principal competitors in the ice cream industry are large, diversified companies with significantly greater resources such as Amul, Kwality Walls, Vadilal and CreamBell , besides a lower threat from local manufacturers (kulfi etc. manufacturers).Rivalry can be characterized as intense, given that numerous competitors exist, the cost of switching to rival brands is low, and the sales-increasing tactics employed by other rivals threatens to boosts rivals unit volume of production. Also, recently there has been a surge in the number of ice cream parlours (such as Baskin Robbins, Naturals, Amazo) . The growing popularity of such premium ice cream parlours providing specialty ice creams will also tend to affect the business of existing companies.

You might also like