Porter 5 Forces

884 Words4 Pages
Porters Five Forces ( Cadbury) Bargaining power of buyers: Porter (2008) stated that where the product is a small fraction of buyers’ costs or expenditures, buyers are usually less price sensitive. Cadbury has to categories of buyers namely, consumers or retailer. Retail buyers are the group that has the most effect for Cadbury and other confectionery producers. They are mainly large retailers like i.e. Tesco, Asda in UK. There is competition for shelf space and threat of backward integration especially with brand only products. That is a very important group, which is directly correlated with the revenue. It could have high effect. Bargaining power of suppliers: Group that has big impact on the final product, in terms of quality and price. The main commodities used by Cadbury are cocoa, milk, and sugar. Any change in the price of those commodities will affect directly the price of the product and the profitability. Confectionery manufacturers are facing increasing cost pressures as Cocoa prices hit their highest levels for 23 years due to fall in Cocoa production (BBC, 2008). Cadbury is using commodity derivative contracts for cocoa and sugar. ‘Cadbury Cocoa partnership’ is established to insure sustainable supply of Cocoa by supporting Cocoa farmers in Ghana, India, Indonesia and Caribbean (Cadbury, 2008). Another way perhaps to strengthen their position would be a backward integration, where they would acquire one or more of their suppliers to ensure that they have control over the commodity price (Johnson et al, 2008). Moderate effect. Rivalry among existing competitors: Confectionary is an industry with stiff competition amongst its players. There are five major players competing globally in confectionery industry: Nestle, Mars & Wrigley, Cadbury, Ferrero Rocher and Hershey with about 42% share of global market (Cadbury, 2008). All of the major players
Open Document