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Porter’s Five Forces Model STUDY ON CADBURY Submitted By : • Yogita Ghag • Simson Dsilva • Harish Shetty .
Porter’s Five Forces Model • Developed by Michael Porter in 1979/1980 • Considered a classic industry analysis tool • Provides a framework for perspective on multiple competitive factors affecting your company and industry Five basic competitive forces whose “collective strength” determines the longrun profit potential of Company .
The Five Forces Threat of New Entrants/ Barriers to Entry Rivalry Among Existing Competitors Bargaining Power of Suppliers Bargaining Power of Customers Threat of Substitutes .
11% • Indian market share. England. • Chocolate industry's second-largest company after Mars-Wrigley • Global market share .CADBURY • Global brand operating in more than 50 countries. London. • Headquarters in Uxbridge. • 12% growth rate over last 5 years consecutively.70% .
Bubbaloo. • Some of the key brands are Cadbury Dairy Milk.Cadbury in India • Cadbury India Ltd. Perk. Gems. Cadbury India operates in five categories Chocolate confectionery. Éclairs. Cadbury began its operations in 1948 by importing chocolates • Today it has six company-owned manufacturing facilities • Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. Beverages. 5 Star. Gum and Candy • In India. Biscuits. is a part of Mondelēz International. Bournville. Tang and Oreo . Celebrations. Halls. Bournvita.
Bargaining Power of Suppliers Strength of suppliers determined by: Number of suppliers and their degree of differentiation Portion of a firm’s inputs obtained from a particular supplier Portion of a supplier’s sales sold to a particular firm Switching costs Potential for vertical integration Cadbury : The company gets the cocoa beans and cocoa butter from West Africa. Hence the suppliers have very little influence on the company. Ecuador and Venezuela. On the whole the suppliers have very low or no power on the company. the company enters into forward agreements and long-term contracts. Most of the sugar is purchased at prices set by the European Union or by other companies through quotas. . A very small potion is bought at fluctuating prices. To further minimize the price fluctuations and to ensure security of the supply. The company has deals with around 40000 suppliers around the world. No single supplier accounts for more than 10% of the raw material purchases.
Power of Customers Power of customers determined by: Number of buyers Firm’s degree of differentiation Portion of a firm’s inputs sold to a particular buyer Portion of a buyer’s purchases bought from a particular firm Switching costs Potential for vertical integration Cadbury The products are mostly impulse goods and they are sold to consumers through many different outlets. In many markets. sales to the large multiple grocery trade accounts for less than 50% of the sales and the buyers are so huge in number that no single customer has any influence on the industry. . ranging from grocery stores to food and entertainment venues. But it is when controversies like worm controversy crop up that the customer power increases. the preferences of the customers are changing to lower sugar content brands and it is important for the companies to understand the customer needs and to develop the products with these preferences in mind. Due to the rising health awareness among the customers.
extensive advertising and promotional programmes. . nearly equal in size or power Slow industry growth High barriers to exit Cadbury : The industry is very competitive and the company competes with many other multi-national. The group competes actively in terms of quality.Rivalry Among Existing Competitors Rivalry determined by number of firms. demand conditions and barriers to exit Competition among rivals is greatest when: There are many competitors. degree of differentiation between firms. relative size. new packaging. taste and price of products and seeks to develop and enhance brand recognition by introduction of new products. national and regional companies.
The total confectionery market is valued at Rs 41 billion with a volume turnover of about 223500 tones per annum. regulation. etc.) Customer switching costs (high fixed costs involved in switching to another supplier) Capital requirements (e.. proprietary technology.g..Threat of New Entrants/Barriers to Entry Threat of potential entrants determined by: Attractiveness of industry Height of entry barriers (e.g. The category is largely consumed in urban areas with a 73% skew to urban markets and a 27% to rural markets. brand loyalty. very high in gas exploration) Incumbency advantages independent of size (e. patents) Unequal access to distribution channels (how much have existing competitors tied up distribution channels) Restrictive government policy Cadbury : The confectionery market is growing and the main drivers are population growth and increased consumer wealth. start-up costs.. .g.
. Hershey formed a joint venture with Godrej in April 2007. Other multinationals such as Mars Inc and ITC Ltd. The Hershey Co. The low per capita consumption of chocolate products in India. The chocolate confectionery experienced the entry of new players in 2007. are also said to be forming plans to enter the confectionery market. has seen consumers upgrade from sugar confectionery to chocolate confectionery. The name “Cadbury” is so synonymously used for chocolates that it is difficult for any new entrant to compete with it.Cadbury The industry is expected to grow at 23% in chocolates segment and sugar confectionery segment has declined by 19%. Many customers are shifting from the domestic brands to the foreign brands. The opportunities for new entrants are high but it is difficult for a complete new brand to come and take over the market. coupled with a booming Indian economy and rising consumer affluence. there are new entrants which are foreign brands that are invading the market. To capture the new growth.
Hence the substitutes are many and may act as a strong force. it faces lot of competition from the home made and purchased Indian sweets. their closeness in function and relative price Not just another product: sometimes the substitute is to “do without” the product or to do it themselves As Cadbury has repositioned the image of chocolates as a sweet dish for any happy occasion. the sweet preparations also serve the same purpose of “Kuch Meetha Ho jaye”. Though they are not the same. Mithai.Threat of Substitutes A substitute performs the same function as an industry’s product or service. . but by a different means Determined by the number of potential substitutes.
globalization. We also find that Michael porter simplified economic theory in which the law of economy existed long ago. customer expectation and organization reinvention have become powerful forces and will continue to do so in the coming years clarifies or touches much on those. Porters model is NOT INVALID but can be the basic for strategy development. management technique and theories. An industry must do a careful market observation and internal and external factors. understand the limitations from this model and study where their company intends to go in future. government laws.Conclusion • Today IT /digitalization. unstable economy condition or needs. for example bargaining power of supplier is actually the supply and demand theory. • • .
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