2.3 SWOT Analysis, Part 1: Opportunities and Threats
ULMA Packaging needs to consider the following opportunities and threats within the UK packaging and manufacturing sector before investing in this market.
* International demand for packaging machinery is predictable to rise by 4.7% annually through 2014;
* US-manufactured equipment is perceived as being poorly adapted to the UK, which gives the European technical standards an edge;
* Favourable fixed investment environment worldwide;
* Developments in the global market for packaging equipment;
* Demand for packaging machinery in food market is growing.
* Overcapacity through cost ...view middle of the document...
On the other hand,the German packaging machinery suppliers have successfully established a strong reputation in global markets. They incorporate their market reputation for greater engineering abilities and durable machinery construction within their marketing strategies, which helps them gain consumer’s loyalty (Czinkota and Ronkainen, 2007). Inthe UK, German suppliers account for almost 40% of the import market share. They maintain their dominant position by differentiating their products on base of quality, which allows them to charge premium price to their clients.
2.5 Porter’s Five Forces Analysis
Porter’s five forces analysis corresponds to the competitive environment of the organization (Mullins, 2009). It is a strategic forethought to avoid putting the competitive edge at risk and make certain the effectiveness of products on a long-term basis. In terms of the company, this framework analysis is quite significant because enables the firm to direct its innovations in terms of choice of strategies and investments (Kotabe and Helsen, 2011).
Intensity of Rivalry:
* Storage costs are comparatively lower
* Limited levels of competition exist in the market owing to governmental legislations
* The size of industry is huge and its exhibits rapid growth rate
* The number of competitors or rivals in the market is relatively low and so is the intensity of exit barriers
Figure 2: Porter’s 5 Forces Analysis for packaging industry
Source: CEO Survey, 2012.
Bargaining power of suppliers:
Following points highlight the aspects related to bargaining power of suppliers.
* The level of competition among suppliers is considerably high and therefore they have to reduce the cost of their services to gain preference
* Owing to huge competition in the supplier market, suppliers are not left with much choice when it comes to bargaining. This puts producers at a major advantage
* Since many such organizations have their branches spread across various regions, the bargaining power of a single distributor is reduced considerably.
* The production inputs in most cases are similar which make the job of mixing and matching inputs easier. This further decreases the bargaining power of suppliers.
* The cost associated with switching of suppliers is low which again puts suppliers at a disadvantage.
Threat of substitutes:
* Substitute product is comparatively inferior;
* Substantial product differentiation.
Threat of new entrants:
* A strong distribution network is required to establish the company;
* Strong brand recognition is important in a new market;
* Investment in advanced technology is required at high level;
* Entry barriers are high.
Bargaining power of buyers: