Bakery Porter.docx

THREAT OF NEW ENTRANTS 

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The bakery industry faces potential threat of new entrants. The reason behind this is that the entry and exit barriers are not high. Not large investments are required for having processing plants As in past it was considered to be a very expensive and costly, whereas now many options available in terms of financing activities, entering bakery business is no longer a big deal. This industry will be facing higher threats if we look into current situation of market opportunities and market potential, because bakery business does carry a high potential of growth in it The demand side is also very high so that means high potential for sales and profit.

SUBSTITUTES      

The bakery has substitutes available in the market for some products like its own made biscuits, but these local bakeries also sell packaged biscuits Different brands are readily available in the market The prices of the products are same and very less variation is present in products and prices. Substitution is not a problem as there exist perfect substitutes at almost no cost of substitution Many substitutes exist for bakery products. Breakfast cereals, rice and potatoes are all viable alternatives and individuals can also make all of the baked goods they want at home. Bakeries rely upon price and convenience to keep individuals switching to a substitute or baking what they need at home.

BUYER POWER    

The concentration of buyer is high in the industry as compared to the suppliers. Bargaining power of customers is high as new entrants have entered the market. This industry is something that relates to health issues and requires sensitive and taste related issues so bargaining power has been reduced by some major players using their brand image and quality image in the market. Industry profit is not that much due to the large number of small bakeries that are competing. As a result, buyers are able to command low prices and volume discounts. Only large players have the power to level the playing field and achieve a more balanced share of the profits.

SUPPLIER POWER  

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There are high numbers of suppliers. Suppliers do not have much negotiating power in the bakery business due to the well developed markets for their products and the commoditized nature of what they are selling. Bakeries can be affected by price swings of the raw inputs, but the changes are a result of global supply and demand determinants rather than suppliers’ negotiating power. The product being a generic product with abundant supply can be substituted easily. So suppliers have very less bargaining power. Companies can switch to any other supplier without any hassle as there are many suppliers with virtually the same product.

COMPETITION  

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Competition has been growing as new players enter the market. The industry is very attractive as it has seen consistent growth from some time. The industry has an annual growth rate in double digits which is very good for any industry. The product offering is the same. Very less product differentiation is present in the industry. The costs for setting up are also moderate. The industry looks attractive and we can expect many new players to enter the market and increase the competition. There are many players in the bakery industry. The industry is characterized by many small bakeries, but there has been a recent trend towards consolidation and economies of scale. Businesses compete on price, quality, differentiation and relationships with key suppliers.