Industry Analysis: Porter's Five Model, Ansoff's Matrix and Blue Ocean Strategy

INDUSTRY ANALYSIS 1
Industry Analysis
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Institution
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INDUSTRY ANALYSIS 2
Introduction
Companies use different tools to gain a competitive advantage over their rivals. Some
of these tools include porter's five model, the blue ocean strategy, and Ansoff's matrix. This
essay aims to discuss the usage of these strategies in the educational, tourism and
entertainment and agricultural sectors.
Porter five forces model is a model of analysis that can be used to analyze a specific
industry and gain an understanding of the underlying profitability of a trade. It presents five
basic forces that affect different sectors (Shinkle et al., 2013, p. 1244). In the Australian
Agricultural Company Limited, the management can utilize Porter's five forces to analyze
how the five competitive forces impact on the profitability and establish a strategy for its
operations.
Australian Agricultural Company Limited is a leading Australian enterprise in the
food, beverages and Tobacco sector. Over the decades, the company has redefined unique
ways of doing business in the agricultural industry. As explained by Hunt et al. (2014, p.
130), this company is listed in the AAX (Australian Securities Exchange, with a stock market
sticker "AAC."
The porter five forces model entails the five basic forces that can shape a business
strategy. This model was developed by Michael Porter, who listed threats of new entrants,
threats of substitutes, suppliers bargaining powers, rivalry among the existing market players
and buyers' bargaining powers as five basic forces that can affect strategic development of a
business.
Threats of new entrants
To start with, new entrants in the agricultural sector include foods, tobacco and
beverage dealers. Through lower pricing strategy, this company has managed to reduce costs
and provide new value propositions to its clients (Hunt et al., 2014, p. 130). Although many
agricultural companies have entered the industry, the Australian Agricultural Company
Limited has tackled these challenges by innovating new services and products. This not only
brings new clients but also gives the old clients a reason to purchase the products of the
company.
Also, the company has majored in building economies of scale, which has enabled it
to lower the fixed costs per unit, thus enabling it to be able to offer its products at relatively
lower prices. Furthermore, by spending more time and money on research and development,
the company has been able to beat the competition as new entrants tend to be less likely to
enter a diverse industry occupied by well-established players.
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INDUSTRY ANALYSIS 3
Bargaining power of suppliers
Almost all businesses in the agricultural and foods, beverages and tobacco industry
purchase their raw materials from many suppliers. Suppliers who dominate the market can,
therefore, decrease the company’s margins. The existence of powerful supplier bargaining
power affects this sector by lowering the overall profitability of food, tobacco, and beverage.
The company has majored in establishing efficient supply chains consisting of multiple
suppliers to weaken the bargaining power of the suppliers (Allen et al., 2014 p 101). Also,
through conducting experiments on product designs using different materials, the company
has been able to control its expenditures on raw materials. Whenever a raw material’s price
goes up, it shifts to another suitable substitute.
Bargaining power of buyers
Buyers tend to be demanding. They usually want to purchase the best market
offerings available while minimizing their expenses. This exerts excellent pressure on the
company's profitability in the long-run. The more powerful and smaller the buyer base is, the
higher the bargaining power (Ellram, 2013, p. 29). In the agricultural industry, many players
have dominated the market. Therefore, there is a high buyer power. The Australian
Agricultural Company has majored in providing its products at low costs to develop customer
preference.
Threats of Substitute products
Research has proven that when a product can meet similar needs of a customer in
different ways, then the profitability of the industry is bound to suffer. The threat of
substitution is usually high when it avails a product proposition which is of more quality than
the existing product, (Ellram, 2013, p. 29). About Australian Agricultural Company Limited,
the organization has not made outstanding efforts to curb the threats posed by other substitute
products. However, if the company can be more service oriented than product oriented, then
it can win customer trusts by offering excellent services. The company should also
concentrate on what the customer needs, rather than what the customer purchases to retain
them.
Rivalry among the competitors.
The stronger the rivalry among the existing market players, the lower the prices and
consequently the lower the profitability of the industry. Ideally, the agricultural sector is very
competitive. Therefore, Australian Agricultural Company Limited strives to beat the
competition by devising some strategies as discussed in the following paragraph:
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