preview

Conducting a five forces analysis Essay

Decent Essays

The market for chocolate bars is a highly competitive field within the fast moving consumer goods sector. Also in the Fairtrade market the number of producers is rising and competition and demand increase. The attractiveness of an industry influences a firm’s profitability effectively and competition within the industry can be described by conducting a five forces analysis as suggested by Porter (1985). This framework addresses the following fundamental factors: Threat of New Entrants, Threat of Substitute Products, Determinants of Buyer Power, Determinants of Supplier Power and the Rivalry among Existing Firms. (Porter, 1985) Analysis of these forces shows that the retail market for standard chocolate bars is rather static and highly …show more content…

55 brands alone sell their Fairtrade chocolate bars in the UK now already and with 12% growth in sales in 2011 this number is expected to increase further and make competition fierce. With an increasing number of comparable products, the power of the buyers rises simultaneously. Most consumers are indifferent towards brands, especially when it comes to chocolate for baking or cooking. They are able to buy a different chocolate bar each time when entering the shop. Due to the fact that chocolate is a luxurious product, price determines demand and consumers are able to switch easily between brands. Compared with the standard chocolate market in Fairtrade the suppliers i.e. the cocoa farmers do not have more power, they have to agree to the market Fairtrade prices for cocoa, but the whole supply chain is much more controlled and under supervision. Lastly, the rivalry among the firms in the industry is high due to great competition and numerous suppliers. Long established chocolate producers can switch change their product ranges to Fairtrade and the other way round, consequently the market remains constantly changing and dynamic for now. In order to create individual competitive advantage each firm has to develop distinctive competencies, decide on one of the generic strategies and create superior value for its customers. The model of competitive advantage of firms was first established in 1985 by M.E. Porter in his study/book “Competitive Advantage:

Get Access