Michael Porter Five Forces: A Case Study of Al Ain Dairy

This document presents a case study on Al Ain Dairy using Michael Porter's Five Forces framework to analyze the competitive forces in the dairy industry in the United Arab Emirates. It discusses the threats of new entrants, substitute products, competition rivalry, bargaining power of buyers, and bargaining power of suppliers, along with strategies to overcome these forces and gain a competitive advantage.

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Michael Porter Five Forces: A Case Study of Al Ain Dairy.
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Michael Porter five forces is a framework that is used to analyze the competitive forces
within an industry (Dobbs, 2014). The model is applicable in any industry. It is used by
organizations when they want to assess their competitive position within their respective
industries. The model presents five forces which influence competition (Dobbs, 2014). Once an
organization analyzes these forces, it is able to come up with strategies to overcome each of the
forces. In this document, the focus will be on the dairy industry in the United Arab Emirates. The
five forces are;
Threats of New Entrants
This refers to the threat that new competitors who get into the industry may pose to
existing businesses (Dobbs, 2014). In the case of Al Ain dairy the new entrants may include; new
dairy companies which may be established in future and other companies which may diversify
into the production and selling of powdered camel milk and ice cream. Once they enter the
industry they will pose a lot of competition to Al Ain dairy since they will disrupt the market.
These competitors mainly come in when the product is at the growth stage of the product
lifecycle (Chang & Wu, 2014).
They are various strategies that Al Ain dairy can use to overcome this threat. The
strategies include; first, forward integration which involves locking-in customers to the
organization. This minimizes the number of customers that the new entrant will get thus
discouraging new entrants (Chang & Wu, 2014). Secondly, backward integration which involves
locking-in suppliers to the organization. This creates a shortage of supplies to the new entrants
(Chang & Wu, 2014).
Third, competitive pricing which involves charging lower prices than the new entrants
can afford to charge. This puts a barrier to the new entrants. Fourth, economies of scale which
involves buying raw materials in bulk and producing the products in bulk in order to enjoy
quantity discounts (Henisz & Zelner, 2012).

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Threats of Substitute Products
This refers to the threat that other products which can be used for the same purpose as the
one an organization is producing offers to the organization (Dobbs, 2014). The major substitute
products that pose threats to Al Ain’s dairy powdered camel milk and ice cream include;
powdered cow milk and ice cream, and non-powdered camel and cow milk. Substitute products
are a major threat since they provide an alternative to customers.
The various strategies that Al Ain dairy can use to overcome the threat of substitute
products include; first, providing high-quality products. These will remain attractive to the
customers despite the presence of alternatives (Porter & Heppelmann, 2014). Secondly, increase
the customers’ switching cost. This can be achieved by biding the customer to Al Ain’s products
through techniques such as repurchase discounts, promotion schemes, among others. This will
make the customers find it difficult and costly to shift to another product.
Third, product differentiation. This involves making the product to be unique so that
customers cannot find a suitable substitute for it (Tanwar, 2013). In this case, Al Ain dairy can
focus on adding new health additives to powdered camel milk that are not available in powdered
cow milk. Fourth, strengthening the brand image. This involves making the brand to be the most
preferred among customers so that customers will buy the product due to the brand. This will
limit substitute products from thriving well in the market (Porter & Heppelmann, 2014).
Competition Rivalry
This refers to the competition that arises from the already existing competitors in the
industry (Dobbs, 2014). Currently Al Ain dairy is the first company to produce powdered camel
milk and ice cream (Astley, 2019). Therefore, this force is not currently present in the industry
and that line of products. However, with time and as the product reaches the maturity stage of the
product lifecycle this force will be the major challenge that Al Ain dairy will have to deal with.
Thus, Al Ain dairy needs to have sustainability in the market in order to overcome industry
based competition (Namada, 2018).

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The various strategies that Al Ain dairy can use to gain sustainability as a way of
overcoming competition rivalry include; first, market development. This involves spreading
products to new geographical markets (Babatunde & Adebisi, 2012). For example, selling
outside the UAE. Secondly, cost leadership which involves reducing the overall cost of operation
without compromising the quality of the products. This will enable Al Ain dairy to sell its
products at a lesser price and still get high returns (Tanwar, 2013).
Third, horizontal integration in which case Al Ain dairy will merge with another
company so that it can remain to be more competitive in the market. It can do so through
acquisition (Chang & Wu, 2014). Fourth, massive market and product promotion. This aims at
increasing the market penetration of the products. It can be achieved through multimedia
advertising which uses a combination of various media in advertising.
Bargaining Power of Buyers
This refers to how easily buyers can drive prices down. This intensity of this power is
influenced by the number of buyers in the market versus the number of sellers in the market
(Dobbs, 2014). The lower the number of buyers the more powerful they are. This can be a
challenge to Al Ain dairy because powerful buyers will reduce the profit margins and also affect
both long term and short term goals. Powerful buyers can also make an organization to exit a
market due to unfair buying prices that buyers are willing to pay for the products.
The Various strategies that Al Ain dairy can use to overcome the power of buyers
include; first, continues product development. This will make buyers be less concerned about
pricing and more concerned about gaining the value that the product offers. Secondly,
customization of products which involves providing products which meet the specifications of a
market segment or a group of customers (Segal-Horn & McGee, 2012).
Third, customer relationship management. This involves improving the way the
organization relates to its customers (Inderst & Wey, 2011). It makes customers feel that they are
part of the organization and thus they will be willing to buy the products at a fair price since they
feel that the organization is not violating them. Fourth, packing in different quantities and selling
the various product quantities at different prices in order to cater for the pricing needs of all
customers.

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Bargaining Power of Suppliers
This refers to how easily suppliers are capable of hiking the price of raw materials. It is
highly influenced by the number of suppliers in the market. The fewer the number of suppliers in
the market the more powerful they are (Dobbs, 2014). Powerful suppliers can easily hike the cost
of production which will, in turn, increase the selling price and reduce the profit margin. Al Ain
dairy should always try to reduce the power of suppliers.
Strategies that can be used to overcome the bargaining power of suppliers include; first,
internal production of raw materials. This is where Al Ain dairy establishes its own dairy farms
to provide it with the camel milk that it needs to produce the powdered camel milk and ice
cream. This will reduce its dependence on external suppliers (Stenbacka & Tombak, 2012).
Secondly, mobilizing new suppliers. This involves encouraging other people to engage in the
production of camel milk and supply the milk to Al Ain Dairy. The aim of this strategy is to
increase the number of suppliers and reduce their bargaining power (Qi, Zhao, & Sheu, 2011).
Third, establishing supplier loyalty schemes such as free training. They aim at attracting
suppliers to the organization and increasing their switching cost to other competitors. This
reduces the supplier’s bargaining power since they get bound to the organization (Stenbacka &
Tombak, 2012).
From the above discussion, it is clear that Michel porter five forces are present in the
industry that AI Ain dairy operates in. These forces pose a challenge to Al Ain dairy, however, it
can apply the strategies discussed above to overcome these forces and become more competitive.

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References
Astley, M. (2019). UAE dairy Al Ain claims world’s first with camel milk powder and ice
cream. Retrieved from https://www.dairyreporter.com/Article/2015/03/20/UAE-dairy-Al-
Ain-claims-world-s-first-with-camel-milk-powder-and-ice-cream
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Chang, S. J., & Wu, B. (2014). Institutional barriers and industry dynamics. Strategic
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Tanwar, R. (2013). Porter’s generic competitive strategies. Journal of business and
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