1.1 Why this industry was chosen for analysis2
1.3 Brief Background of the organic food producing industry2 1.4 Competitive environment?3
2. PESTEL analysis5
2.1 Political factors5
2.2 Economic factors6
2.3 Socio-cultural factors7
2.4 Technological factors8
2.5 Environmental factors9
2.6 Legal factors10
3. Porter’s Five Forces analysis12
3.1 Threat of new entrants12
3.2 Threat of substitute products14
3.3 Threat of established rivals14
3.4 Bargaining power of suppliers16
3.5 Bargaining power of buyers16
4.1 The industry at present18
4.2 Future changes19
5.1 Critique of tools and research limitations20
5.1.1 PESTEL framework20
5.1.2 Porter’s Five Forces20
1.1 Why this industry was chosen for analysis
The chosen industry for analysis in this report is the organic food producing industry in the United Kingdom. This encompasses groups of firms that produce similar products, in this case, organic food produce. In recent years, there has been a heightened awareness in the media in relation to organically produced food, and a great emphasis has been placed on ‘healthier eating’ and a reduction in the production of genetically modified food. As this awareness increases, it is important to analyse the industry in order to assess whether the industry is favourable to exist in, and to ascertain whether it is likely that it will be penetrated by new competitors. Another reason for choosing to examine this particular industry is due to the lack of an updated Mintel report, or a similar financial report, especially since there has been so much extra attention being placed on this industry of late in the media. In order to get a better picture about the macro- and micro-environment in relation to the UK organic food producing industry, frameworks will be used in order to analyse information about the industry.
The aims of this report are to research and assess the nature of the organic food producing industry in the United Kingdom. This will occur by using two different frameworks, a PESTEL analysis and the use of Porter’s Five Forces in order to fully understand the competitive micro- and macro-environment of this industry. When the analysis is complete, it will be determined whether the industry is favourable to enter or not, and future changes in the industry will be predicted.
1.3 Brief background of the UK Organic Food Producing Industry The term ‘organic’ has been defined by the Organic Trade Association as an ‘ecological production management system that promotes and enhances biodiversity, biological cycles, and soil biological activity... based on minimal use of off-farm inputs and management practices that restore, maintain, and enhance ecological harmony’ . In practice, this means that artificial chemical fertilisers and pesticides are not used, and animals are reared without the drugs that are normally routinely used . Protection of the environment is of great importance, and the quality of the soil is what determines whether the produce can be deemed as ‘organic’ or not. Historically, it was common practice to only have relatively few family run farms in which organic food was produced, and this could be purchased in farmers’ markets and smaller stores, such as green grocers. However, since the 1990s, organic food has had growth rates of around 20% per year, and figures from April of this year show that organic food now accounts for 1 to 2% of food sales worldwide . This growth rate has been partly due to large supermarket chains adopting ranges of organic foods, which is reducing the farmer to consumer link, and providing a convenient new way to eat ‘organically’, and also due to an increased interest from the media in this industry. For example, large supermarket chain Sainsbury’s has more than 1000 organic products, had a 14%...