Analysis of External Environment of Organic Drink Market using Porter’s Five Forces Framework

This report analyses the external environment of the Organic Drink Market using Porter’s Five Forces Framework. It includes market size, behaviour, opportunities, and threats. The report recommends expanding the business in the online market and adding new flavours to attract more consumers.

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Executive summary
The main aim of this report is to analyse the external environment of Organic drink market.
The demand of Organic drink market is increasing day by day, it can be said that the Organic
drink market is expanding in the wide range in the near future. Suppliers, buyers, competitors
and the substitute products are the main external factor which are analysed with the help of
Porter’s five forces framework method. Organic drink market has a successful future in the
next five years. New Flavour, technology and online market are the techniques to expand the
market.

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Table of Contents
Introduction...........................................................................................................................................3
Description..............................................................................................Error! Bookmark not defined.
Porters five forces framework...............................................................................................................4
Opportunity and Threat.........................................................................................................................6
Recommendation...................................................................................................................................7
Conclusion.............................................................................................................................................7
References.............................................................................................................................................8

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Introduction
There are many tools which are used to analyse the strength and weakness of the industry.
Porter’s five forces framework is a tool which is used to analyse the external environment of
Organic drinks. In this report, organic drink is selected to analyse the situation of the
product’s market; whether it will have a good scope in future or not. In the first phase of the
report, market size and behaviour has been analysed. In the Next phase, external environment
of the market is analysed by using the Porter’s five forces framework model. At the end of
the report, the recommendation will be provided for the improvement.
Industry Background
Organic food market produces food by many methods in Australia. The total value of
Australian organic market is estimated $2 billion. Australia organic drink grows rapidly with
high profits; Bellamy’s Australia and Parkers has large market share in the organic drink
product (Foodnavigator, 2017). Parkers operate in many countries thus; the Australian
organic drink market has expanded at the international level (Weber, 2015). There are many
others small firm which manufacture the organic drinks like Wild one. Consumer is the main
driver for the market and substitute products are the barriers for the market.
(Source: Weber, 2015)

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Porters five forces framework
New entrants- High threat
Low cost requirement
Bargaining power of Buyer- High power of
Buyer
Many options
Bargaining power of supplier- Minimum raw
material
Highest power of the supplier
Substitutes- Energy drink
Protein shake
Competitors- Many big and small firms producing Organic Drink
The threat of new entrant
Organic drinks have a high threat of new entrants because the existing brands have strong
brand name. The new entrants can easily enter the market because there is low cost
requirement but the existing companies of Australia have strong brand name. It is difficult for
the new companies to beat the old companies (Dobbs, 2014).
Bargaining power of supplier
It has been emphasis that the organic drink market of Australia has high bargaining power of
suppliers. In Australian market, there is large number of manufacturer companies of organic
drink; and due to less supply of raw material the bargaining power of suppler is high.

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Bargaining power of Buyer
It has been evaluated that organic drinks have high bargaining power of buyer because there
are many department stores and grocery stores which offers the discount on the products.
Low prices always attract the customer towards the products and for attracting the customer
these stores are offering discounts. So, there are many options for the customers to buy the
product.
Threat of Competitors
Nowadays, it has been seen that the organic drinks have a high and strong competition. The
new companies can enter the new market with some new quality and flavours which attracts
the customers towards the product. The other pressure on organic drink is substitute products
which influence the customer to buy the substitute product instead of Organic drink
(Rothaermel, 2015).
Threat of Substitute
There is high level of risk of the substitute products such as energy drink, protein shakes and
many nutrients shakes. It is observed that the protein shakes; energy drinks and nutrients
shakes can easily replace the organic drinks. Substitute products have a strong brand value
like red bull has large amount of market share which attracts the customer (Rothaermel,
2015).

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Opportunity and Threat
Opportunity
With the developing economy, online demand of consumers is increasing. It has an
opportunity to the organic drink market to enter into the online market for expanding the
business. It has been seen that the consumers are more conscious for their health which
generates the more sale and attracts the new firms to enter into the market (Baldwin, 2016).
Threat
It has been seen that the organic drinks market has high threat of substitute products.
Departments, groceries store offer the discount which attracts more consumers; means
demand of the product in increasing. New entries can enter the health product market with the
new flavour and unique quality due to increasing preferences of the consumers towards the
healthy product. Thus, it increases the competition of the market (Grant, 2016).
pportunityO
nline marketO
More consumers
hreatT
substitutes products
ew advance fi rmsN

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Conclusion
From the above analysis, it has been concluded that organic product market is growing
rapidly in the developing economy. Organic drink has high threat of new entrants.
Departmental and grocery stores give discount to the consumers on the products which
increases the many option for the byers thus the bargaining power of buyer is high but the
raw material is minimum that is a reason of high bargaining power of suppliers. The company
has many opportunities to expand the business. It has been concluded that the Organic drink
will grow fast in the developing economy.
Recommendation
With the increasing demand of the consumer for the healthy products, the organic product
market is growing fast. There is less threat of new entrants so the existing companies can
easily more concentrate on the new flavour or new strategies to grab the market share instead
of making strategies to compete the new entrants. New technology and recipes attracts the
more consumers towards the product market. From the above analysis, it has been
recommended that the organic drink market has to expand its business in the online market to
grab high market share in the healthy products or by adding the new flavour in the product, it
attracts the more consumers. Market can manufacture the new flavour according to all types
to customer so they can target the all age group customer and generate more sales (Jiang,
Tadikamalla, Shang, and Zhao, 2016).

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References
Baldwin, M. (2016) Critical reflection: Opportunities and threats to professional learning and
service development in social work organizations. In Social work, critical reflection and the
learning organization. Oxon: Routledge, pp. 51-66.
Dobbs, E. M. (2014) Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
Foodnavigator. (2017) Organic in Australia: The latest consumer trends and business
opportunity revealed. [online] Available from:
https://www.foodnavigator-asia.com/Article/2017/11/16/Organic-in-Australia-The-latest-
consumer-trends-and-business-opportunitiesrevealed?
utm_source=copyright&utm_medium=OnSite&utm_campaign=copyright [ Accessed
5/09/18].
Grant, R.M. (2016) Contemporary strategy analysis: Text and cases edition. US: John Wiley
& Sons.
Jiang, G., Tadikamalla, P. R., Shang, J. and Zhao, L. (2016) Impacts of knowledge on online
brand success: an agent-based model for online market share enhancement. European
Journal of Operational Research, 248(3), pp.1093-1103.
Rothaermel, F. T. (2015) Strategic management. US: McGraw-Hill Education.
Weber, J. (2015) Parker Hannifin: Attractive Dividend Growth Investment. [online]
Available from: https://seekingalpha.com/article/3281865-parker-hannifin-attractive-
dividend-growth-investment [Accessed 5/09/18].
Wheelen, T. L., Hunger, J. D., Hoffman, A. N. and Bamford, C. E. (2017) Strategic
management and business policy. UK: Pearson.