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Porter's Five Force Model Analysis For Indian Cigarette Industry

Threats of New Entrants=LOW
 New Product differentiation very Tough - already cigarettes at different price points,
flavours, brand images .

 Access to distribution channel is tough - big & established players are present (e.g.
ITC)

 Capital requirement is very high for a pan India launching;  Local launch cannot catch up scale - Can't use Economies of scale  Government policy - high tax, no TV/Radio Ads

Bargaining Power of Suppliers=LOW
 Many inputs are required but in small amount - paper, tobacco, filter  There are many small scale, unorganized suppliers  Cigarette companies are big and have direct access to distribution channel and addicted buyers. Suppliers don't have much control over smokers.

Bargaining Power of Buyers=LOW

Godfrey Philips.Research shows most people cannot differentiate among the brands in a blind taste  Low switching costs in terms of price Threat of Substitute Product=LOW  Herbal Cigarettes (e.g. GTC etc .but again no comparison with cigarettes in terms of popularity and usage Competitive Rivalry in the Industry=HIGH  Many competing players: ITC.even after knowing harms people can’t leave it.event sponsorships and sales promotions  All making new product launches . Addicted customers . Nirdosh) were launched but did not become popular (no emotional value)  Nicotine patch is another substitute . VST.  Smoking has lot of symbolic and emotional values attached with it  Product quality not much important to smokers .see chart below  Price competition continues  Advertisement for cigarettes is now prohibited in India  Replacement for ads .

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HIGH. making the industry quite competitive. they are able to negotiate the price with the company.FMCG SECTOR OF ITC BUYER POWER:.UNFAVOURABLE *Too many small firms multitude of choices. *Low switching cost *Buyers are numerous and fragmented *Considering buyer power retailers .UNFAVOURABLE. *It does not cost anything for a consumer to buy one brand of shampoo instead of another. THREAT OF SUBSTITUTES :HIGH.PORTER’S FIVE FORCES.MODERATELY UNFAVORABLE Numerous substitutes are available PORTER’S FIVE FORCES: SUPPLIER POWER:-LOW-FAVOURABLE *Large number of suppliers in the country *Cost of switching suppliers is low *Prices of substitutes are low DEGREE OF RIVALRY:-HIGHMODERATELY UNFAVOURABLE *Consumer in this category enjoy THREAT OF NEW ENTRANTS:HIGH. *No dominating firm *Little product differentiation *Customer switching costs are low .

BARGAINING POWER OF CUSTOMERS       The bargaining power of customers determines how much customers can impose pressure on margins and volumes. TAJ. 3. The high class hotels are operating by few hotel chains ITC hotels have control over the industry. The hotel industry is one of the most invested in its fixed assets. 2. ITC& Oberoi are having various rates and tariffs. So they are trying to recover their amount quickly. etc. so they have to reduce their bargaining power to attract the customers. Some unseasoned timings the hotels are offering discounts and incentives to reduce the bargaining power of buyers. The hotels customers are fragmented. Because they are having their own brand image. The suppliers are providing better information about them to attract the customers’ Here the buyers are highly informed. Brand loyalty of customers like ITC. If the hotel price changes are moderate. The hotel chains are operating different services like Spas. Heritage HOTELS.Porters 5 forces analysis for I T C hotel 1. City Centers. Boatels. and LEELA . Resorts. The foreign hotel chains are tied up with Indian hotels to reduce the initial cost and using the latter’s brand name. There are no substitutes for spas and five star hotels. The Taj. the Customers have low margins and are price-sensitive. BARGAINING POWER OF SUPPLIERS        The term ‘suppliers‘ comprises all sources for inputs that are needed in order to Provide goods or services. THREAT OF NEW ENTRANTS    ITC being premium name in 5 star and 7 Star hotel industry and also the capital requires to run premium hotel would be very high for new entrant.

4.   PALACE affects the new entrants. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. Access to raw materials and Distribution channels are controlled by Existing players like TAJ. The cost of land in India is high at 50% of total project cost as against 15% abroad. THREAT OF SUBSTITUTES   A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. In India the expenditure tax. . ITC. Effective tax in the South East Asian countries works out to only 4-5%. luxury tax and sales tax inflate the hotel bill by over 30%. This acts as a major deterrent to the Indian hotel industry. and LEELA PALACE.

etc. slowly picking up in secondary cities   . on profitability for every single company in the industry. The healthy competition among the all players is helping to increase the industry growth. spas. and hence. Taj. LEELA PALACE. heritage hotels and palaces. The present demand and supply of hotel rooms is one of the reasons to choose a substitute. High competitive pressure results in pressure on prices. The top competitors in hotel industry are having the same services like five star. margins.) is dominating the substitutes. Intense in metro cities. COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS  This force describes the intensity of competition between existing players (companies) in an industry. More fixed cost and switching costs affects the business. boatels and motels. The price variation of same class hotel services from various brands is one of the reasons to choose a substitute.    Brand loyalty of customers (ITC. 5. The hotel relationship with customer and costs also the reasons to switching to substitutes.