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Unformatted text preview: 1.0 Competition in premium chocolate industry The competition in the premium chocolate industry can be explained by applying the Porters 5 forces model. This model, named after Michael Porter (1979), can be looked upon as a framework to analyze and structure an industry. It is a theoretical tool to elaborate the potential threats but also the chances of a particular industry. Porter mentions five forces that have an impact on an industry; suppliers, buyers, potential entrant, substitutes and the rivalry among existing firms. (Production of Analysis, viewed 11 th June, 2010) The Porters 5 forces model for Chocolates premium industry Bargaining power of suppliers In production of premium chocolate the primary raw material is cocoa bean, secondary sugar, and milk. Concerning sugar and milk, there are numerous suppliers of these materials available around the world; there is no concentration, neither a necessary differentiation. Manufacturers can use financial techniques such as hedging in order to reduce the impact of price rises on their own margins. In addition to the fact that according to CAOBISCO, there are 4.5 million of cocoa farms around the world, to whom the chocolate manufactures are an extremely important customer, the bargaining power of the chocolate premium industry suppliers is generally low (CAOBISCO, 2009). ). However since the fine grade cocoa production represents a small part of the world’s supply, the bargaining power of superior cocoa beans supplier’s increases. Bargaining power of buyers There are many buyers in the premium chocolate market. Large chains command a lot of power; however, there are also a lot of independent sellers. Since many premium chocolate manufacturers have their own unique selling point and the products are not standardized, buyers cannot easily switch to another manufacturer and get the same product. Many manufacturers have integrated forward in the market and handle the retailing of the products, such as Laura Secord. As far as the bargaining power of Rogers Chocolates is concerned the company has unique quality products and has distinctive and exclusive taste so the buyers have more attraction towards Rogers’s chocolates. So the buyers cannot get this unique quality of products from others and have good awareness of Rogers Brand so they cannot easily switch to other manufacturers so it reduces their bargaining power. ( Rogers Chocolates, 2010 ) Threat from Substitutes Some substitute products for premium chocolate could be traditional chocolate and other confectionary products customers could use to satisfy their sweet tooth. Other snack food items may also be considered substitute products. The chocolate industry must compete with numerous substitute products ranging from candies and cookies. Many non-chocolate snacks, such as peanut butter, fruits, yogurt and ice cream are also available. So there is a good variety of substitutes available for the customers that make the threat of substitute products high in the...
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This note was uploaded on 02/20/2012 for the course H/A 121 taught by Professor Alamo during the Spring '12 term at Morgan.
- Spring '12