EXTERNAL ENVIRONMENTAL ANALYSIS OF CLOUD

KITCHEN

PORTER'S FIVE FORCES

Porter's five forces are used to measure the industry attractiveness, and these forces help
understand the underlying drivers of profitability and competence. If the competitive force is
high in any industry, then the profit potential of a firm in that specific industry is decreased.
These forces are explained by Michael Porter, professor at Harvard University and thus is
named after him as Porter's 5 forces. The basic idea of this analysis is to identify that apart
from competing with your direct competitors, you also fight for profits with a broader set of
competitors listed below.
The following are Porter's 5 forces
1) Rivalry among Existing Competitors
2) Threat of New Entrants
3) Threat of Substitutes
4) Bargaining Power of Suppliers
5) Bargaining Power of Buyers

1. RIVALRY AMONG EXISTING COMPETITORS- This force determines how

intense the competition is among the existing companies in the industry.
The cloud kitchen in India has been gaining momentum since lockdown. After the second
round of lockdown, takeaways and online delivery have increased to 37%, as per the NRAI
Covid impact assessment report. This has encouraged small entrepreneurs to start their cloud
kitchen business with minimal investment. However, the rivalry is intense if there are a lot of
competitors with equal size and power and if the industry growth is slow, which is not the
case in this industry.

The following factors affect the industry rivalry-

Not many competitors- As this industry is still gaining momentum, there is not an intense
competition as the competitors are not of equal size and power
Rapid industry growth- As per the projections, the industry is growing rapidly as many
small entrepreneurs are venturing in this industry and increasing demand after the covid
period.
Low exit barriers- As the initial cost of investment in fixed assets is not high and there are
not many government and social restrictions, the exit barrier is also low. If there are no
profits, the company can easily exit the industry.

Hence, the industry rivalry for the cloud kitchen industry can be considered low to moderate.