Q1) Discuss the competitive forces in the dairy processing industry. Identify the other industry that Bauhinia has entered and highlight the key differences in the competitive forces between the two industries. Comment on their comparative attractiveness in Hong Kong.
Five forces model
a)Potential new entrants
laws on food safety
customer loyalty to established brands of leading market players dairy products are mostly perishable, which requires high turnover,reliable supply chain and distribution channels. Economics scale is achievable by building new capacities in jumps in the dairy industry. It cohere mainly with specialized equipment, which is used for production of milk and milk product.
b)Rivalry among existing firms
Oligopoly-three dominant firms: Nestle, Kowloon dairy, Trappist dairy
Stages of the industry life cycle: Maturity Stage
the dairy product has been standardized:
liquid and powdered milk
widely available on the market:
Distribution is well established:
storage the dairy product below 4 degrees Celsius refrigeration equipment ,distributing to various selling point by truck
Milk and milk products cannot be stored for a long time; a great emphasis is put on their freshness. It is necessary to sell these products soon, and therefore businesses pursue to promote sales also with the help of temporary reduction of prices.
Exit barriers are high
Exit barriers in the dairy industry are mostly based on the specialized equipment, which cannot be used for anything else. Relatively high capital demands strengthen exit barriers too. This fact forces businesses to stay in the industry at all costs and to continue in competition fight.
c) Bargaining power of buyers
No switching cost:
Product differentiation is low and different according to the type of product in the industry. In specific products there appears loyalty of...
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