Porter's Five Forces Analysis Sample: UK Bottled Water Industry
Buyer power
In the UK bottled water industry, buyer bargaining power is high since there are many bottles water lines and many alternatives to consider. There are also no significant switching costs on the buyers. For instance, price difference between Dasani and Aquafina is so insignificant that buyers can switch the products at no cost. Brand loyalty is also currently dwindling giving consumers a higher bargaining power. According to the Mintel reports on the UK water, bottled industry the idea that bottled water represents the choice of purity and good health greatly influences their decision to buy. On a global perspective, the fact that bottled water is the fastest- growing beverage category in the world ensures buyer volumes, which is the case in the UK translates to high bargaining power. In general, the UK bottled water industry can be said to possess a high customer buying power (Forsyth, 2011).
Threat of new entrants
In the UK bottled water industry, the threat of entry of new competitors is low owing to the fact that existing competitors are currently large dominating companies who already own a huge market share of the industry, leading to a stiff defense on market share (Forsyth H. , 2010). This in turn makes it hard for new entrants in the market to easily break-even. In the UK market share is split among giant companies in the food and beverage industry that have developed brand recognition and loyalty and have achieved low-cost production and distribution capabilities that cannot be matched easily. It is also expensive to initially develop the infrastructure to produce the product. In strength of the above reasons The UK bottled water industry is therefore considered to have a low threat of new entrants in relation to porters five forces (Doria, 2006).
Threat of Alternative Products
The global beverage industry is faced with alternative products and the UK bottled water industry is no exception. The threat of substitute products is high with numerous bottled and non-bottled products that can easily substitute bottled water existing in the market. Consumers are seeking healthy drinks with no sugar and zero calories as matter of choice between good and bad health. Examples include soft drinks such as coke zero and diet soda; tap water also poses as a threat to bottled water with many people trusting the tap water to be clean and cheap. Switching costs to alternative products is minimal; this in turn gives an edge to alternative products. The threat of alternative products is therefore high in this industry (INSEAD, 2012).
Industry Rivalry
Defense of existing market share, availability of alternative products and insignificant switching costs together with the high bargaining power of the consumers creates rivalry among the industry players. As pointed out in the Mintel report there still is room for growth in the industry thus competition is high. Players put emphasis on their Branding, marketing and distribution strategies to beat completion. Considering the above, industry rivalry comes out as high and reactionary to existing market conditions (Lloyd, 2012).
Supplier power
Supplier power in this industry is low. Firstly as the Mintel reports indicates availability of alternatives and competition has led to discounting at high levels, Secondly with water being basic and readily available the supplier bargaining power diminishes. In the UK, the cost of switching from suppliers is in minimal and there exists multi-sources of supply making the supplier power low (Armas & Sutherland, 1999).
Reference
Forsyth, H. (2010, November 23). Bottled water has become liquid gold. Retrieved February 26, 2013, from BBc:
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