Use Porter's five forces competition model to analyze a certain industry

Discussion on corporate development strategies based on analysis of Porter's five forces model

[Abstract] According to Michael Porter's corporate competitive strategy theory, corporate competitive advantage is determined by the industrial structure. It is determined by the five competitive forces in an industry (namely, the threat of entry, the threat of substitution, the bargaining power of buyers, the bargaining power of suppliers and competition from existing competitors). To combat these competitive forces, companies must take Corresponding development strategies to establish their own competitive advantages. This article attempts to apply Michael Porter's five competitiveness models, taking the analysis of the competitive situation of my country's juice beverage industry as a starting point, and puts forward suggestions on how juice beverage companies can choose the correct development strategy.

[Keywords] Porter's five forces model; competitive situation; development strategy; juice beverage company

In the 1980s, Michael E. Porter published "Competitive Strategy" (1980), "Competitive Advantage" (1985) and "National Competitive Advantage" (1990) formed the famous "Porter Trilogy". This set of theories introduced the industrial organization analysis method into the field of strategic management and formed His unique corporate competitive strategy theory has had a profound impact on a global scale. Michael Porter's theory is based on the "structure-behavior-performance (SCP)" paradigm of industrial organization economics and believes that enterprises Competitive advantage is determined by the industry structure and is determined by the five competitive forces in an industry (namely, the threat of entry, the threat of substitution, the bargaining power of buyers, the bargaining power of suppliers and competition from existing competitors). This The status of the five basic competitive forces and their comprehensive intensity determine the intensity of competition in the industry, and thus the ultimate profit potential of the industry. To combat these competitive forces, companies must adopt corresponding development strategies and establish their own competitive advantages. .This article attempts to apply Michael Porter's five competitiveness models, analyze the competitive situation of China's juice beverage industry, and provide opinions on how to grasp competition and choose the correct development strategy in view of the current difficulties faced by juice beverage companies. .

1. Competitive Situation in the Fruit Juice Beverage Industry

In recent years, fruit juice drinks have gradually been accepted and recognized by consumers for their “green, nutritious, environmentally friendly, and healthy” characteristics. The market is developing broadly. The increasing prosperity of the fruit juice market has brought about differentiation in consumption forms and methods, which are mainly characterized by the following characteristics: First, the fruit juice drink consumption market is significantly younger. According to the new generation CMMS2000 survey results, the juice drink consumer group There is a trend of getting younger, with consumers aged 20 to 40 accounting for 61.3% of the market share of juice drinks. Second, the types of juice drinks are showing a diversified development trend. Companies have developed products based on the health, nutrition and other consumption concepts pursued by consumers. New types of juice drinks have gradually formed a pure juice drink market that is of concern to young and middle-aged women, a low-concentration juice market that is favored by young consumers, a children's juice drink market segment, a compound juice drink market, etc. Third, the consumer brand characteristics of juice drinks are obvious. When choosing, consumers focus on the basic factors of product taste, price and brand awareness. Domestic juice brands are moderately priced, have good credibility and have great brand advantages. Consumers are highly satisfied with most brands, but consumer brands Loyalty is low.

In the 1980s, domestic juice drink brands have appeared one after another. However, due to deficiencies in market cultivation and own operations, they have gradually withdrawn from the market, or have been limited to a certain regional market. Within the country, there was basically no power to launch a nationwide market offensive. It was not until 2001 that the unified launch of the PET-packaged "Fresh Orange" was successful. Domestic and foreign brands such as Coca-Cola, Master Kong, and Yangshengtang followed suit, and many brands seized the juice drink market. The competitive landscape has the following characteristics:

1. Fruit juice drinks present a market structure of monopolistic competition. According to the statistical report of the China Beverage Industry Association, as of 2005, the market penetration rate of juice drinks reached 36.5%, ranking first in the market. Ranked fourth in the beverage industry. At the end of the same year, according to the sales statistics of juice drinks in key large-scale retail malls across the country by the China National Commercial Center, based on comprehensive market share, the top three were Uni-President, Huiyuan, and Master Kong. According to Boston Consulting Company The proposed "Three and Four Rules" rule: In a stable competitive market, the number of influential competitors will never exceed three. Among them, the market share of the most powerful competitor will not exceed that of the smallest competitor.

2. Each market segment is king. The competition in the juice drink market is also reflected in different sub-markets. The first category is low-concentration juice drinks with a juice content of only 5-10%. In this category Within the camp, Uni-President’s “Fresh Orange Duo” and Master Kong’s “Fresh Daily C” are represented, both of which occupy a higher share in the market segment. The children’s juice drink segment is represented by Coca-Cola Company’s “Queer” Mainly. The other type is the compound juice market with a juice concentration of about 30%, which has been very popular in recent years. The main representatives are Watsons' "Mr. Juice" and Yangshengtang's "Nongfu Orchard". This type of product has been favored by its novel product features. It is popular among young people who pursue fashion. However, since the price of a single product of "Mr. Juice" is much higher than that of "Nongfu Orchard", the sales volume of "Nongfu Orchard" is better than that of "Mr. Juice" in terms of consumption. In addition, as a pure juice As a leader in the market, the brand and reputation established by Huiyuan are deeply trusted by the Chinese people. However, with the impact of international professional pure juice brands such as Conner, competition in this market segment will become more intense in the future.

3 .Competition is fierce, but there is a lot of room for development and opportunities. There are many brands and types of fruit juice drinks in the market. Each brand has strong advertising efforts and competition is fierce. However, from the perspective of the product life cycle, the market for fruit drinks is currently in a growth stage and there is room for development. Huge. From the perspective of market share, no brand has an absolute advantage and has become a leading brand.

2. Analysis of Porter’s Five Forces Competition Model in the Juice Beverage Industry

1. Present There is competition among competitors. From the perspective of the industry life cycle, with the improvement of people's living standards and consumption power, the juice beverage industry has entered a period of rapid development. The products are recognized by the public and the market demand is large. At present, juice drinks There are many powerful competitors in the market, with a wide range of product categories and leaders in each market segment, but there is a lack of strong brands. Although many small and medium-sized enterprises do not have brand advantages, they have succeeded in the niche market with their superb copying and imitation technology. Market sub-markets also have a certain impact. These companies often use price competition to compete with well-known brands for the market. Large companies are faced with the dilemma of declining profits, while small and medium-sized enterprises are under huge competitive pressure in terms of funds, channels, products, etc., coupled with the price war It can be predicted that competition among existing competitors will continue to intensify for a long time to come.

2. Threat of new entrants. The threat of new entrants mainly depends on entry barriers and the strength of existing enterprises. Counterattack. The author believes that the threat of new entrants in the juice beverage industry has the following aspects:

First, economies of scale. Generally speaking, the entry barriers formed by economies of scale are either new entrants risking There is the risk of strong counterattack by existing companies, entering with a large production scale. Or enduring the disadvantage of high product cost for a long time, entering with a small scale. Fruit juice beverage companies are "equipment production-type" companies, with good equipment production lines and excellent processing technology. It means higher production efficiency and lower production cost. According to the 2005 sales data of major national large-scale retail enterprises by the China National Commercial Information Center: "Uni-President" has a comprehensive share of 20.17% in the juice drink market, ranking first Leading position. A very important reason why "Uni-President" can obtain such a high market share is "Uni-President" company's perfect production lines. "Uni-President" company expanded its juice drink production lines from 6 to 12, expanding the production scale. Take advantage of economies of scale to gain greater competitive advantage.

Second, the counterattack of existing companies in the industry. Juice drinks have huge market development potential, attracting more and more new entrants and leading the market. Players use existing advantageous resources to fight back, such as controlling raw materials and increasing the costs of new entrants. Controlling terminal sales, blocking competitors, increasing sales costs of opponents, etc., form entry barriers.

Third, capital requirements. Market entry requires a large amount of investment, which constitutes an entry barrier. Currently, in the fruit juice beverage market, the cooperation and alliance between "Uni-President" and "Huiyuan", the cooperation between Master Kong and Japan's Asahi, and the acquisition of international juice brands by "Liangle" , these capital operations put great pressure on new entrants, making it difficult for new entrants to compete in capital operations.

3. Threat of substitutes. Substitutes in the juice drink industry are not just other types of Beverages are also facing the impact of nine other categories of drinks. If the price of substitutes is lower, then

The price limit of juice drinks will only be at a low level, which limits the income of juice drinks. The more attractive the price of alternative products, the greater the restriction, and the greater the pressure on the juice drink market. .This will intensify competition in the industry, and companies must pay attention to the threat of substitutes. 4. Bargaining power of buyers. Generally speaking, the bargaining power of buyers in the juice drink market is strong. First, from the perspective of sales model, in the first-line large In cities, dealers have more information and have less product differentiation. Therefore, dealers have greater bargaining power. In second-tier cities, companies mainly rely on dealers to gain market share, but dealers are less profitable and less motivated. As a result, they have strong bargaining power. Secondly, from the perspective of retail terminals, for hypermarkets such as Wal-Mart and Carrefour, their paving fees and entrance fees are very high, and they are very strict about the selection of PET bottled juice drinks on the shelves, and most of them choose For juice drinks with considerable brand effect, such stores must also participate in setting the retail price of the product based on their own interests. As for small and medium-sized stores, small shops, etc., they are very price sensitive, have many substitute products, and have strong bargaining power.

5. Suppliers’ bargaining power. Suppliers’ main threats are to increase supply prices or reduce the quality of supplied products and services. From the perspective of raw material supply, China is rich in fruit resources, and many juice beverage companies have own production base, the bargaining power of suppliers is not strong. However, as China's low-cost, high-quality, and highly competitive juices enter the international market, a large amount of domestic and foreign funds have been attracted to the industry. On the one hand, a large number of The capital investment has caused overcapacity in the production of concentrated juice in China, and the insufficient supply of raw materials has led to an increase in purchase prices and an increase in corporate production costs. On the other hand, the reduction in profits requires companies to reduce production costs, and the most effective way to reduce costs is to lower the purchase price of raw materials. , lowering the purchase price will damage the interests of farmers, seriously damage the production factors of juice production enterprises, and lead to the gradual loss of competitive advantages in the industry. In addition, PET bottles used for packaging have small unit value, light weight, large volume, and manufacturers The characteristics of concentrated use make its transportation costs high, which once led to strong bargaining power of PET suppliers. In this regard, many companies have adopted alternative methods such as PP bottles and aseptic cold filling to reduce packaging costs. Fruit juice beverage companies are very concerned about packaging costs. Strict control has caused beverage packaging to be squeezed by profits from three levels: upstream industry (raw materials), competition in the same industry, and downstream enterprises (customers). The profits of the beverage packaging industry are very low. Its bargaining power has become weaker.

3. Analysis on the development strategies of fruit juice beverage companies

How fruit juice companies develop their own competitive advantages, fight against the five competitive forces, or influence the five types of competition according to their own wishes, are all based on corporate development The formulation and execution of strategies. Generally speaking, a successful strategy requires a long-term, simple and consistent goal, closely integrates the surrounding environment, makes an objective evaluation of resources, and efficiently combines resources to implement the strategy. Based on the above analysis, the following is the juice The competitive situation of the beverage industry and suggestions for corporate development strategies are put forward.

1. Differentiation strategy. Differentiation strategy means that the products or services provided by the company have unique advantages compared with other competitors in the same industry. , and for a long period of time, competitors are unable or difficult to provide this advantage. Regarding the market competition structure of the juice beverage industry, if companies can find new entry points and achieve differentiation based on market demand, their development will be have sustained competitive advantages. The author believes that juice companies can start from the following aspects to implement differentiation strategies: first, grasp market changes, adapt to local conditions, seize opportunities, develop new drinks, rationally position, and achieve product category differentiation. Secondly, in When implementing a product differentiation strategy, you must pay attention to the company's own resource conditions. It is best to operate in a small-scale market, first achieve regional differences, and then enter a large-scale market to achieve differentiation. When promoting a new product, in addition to keen market acumen, In addition to a flexible mind, effective differentiation methods and a strong brand concept, it is also necessary to establish a rigorous promotion standard department and implement effective marketing plans for sellers, merchants and consumers in accordance with the standards in order to maximize the Achieve differentiation. Finally, companies realize that product differences are only temporary. To maintain their uniqueness and lasting competitiveness, the key is brand culture construction. Products can be imitated, but the differences and uniqueness of the brand cannot be copied. , this is the core of true differentiation.

2. Low-cost competition

Competition strategy. Low-cost competition strategy refers to a strategy for enterprises to gain competitive advantages by reducing costs and having greater profit margins with competitors under the same circumstances. Beverages are highly price sensitive, and price is the factor consumers decide to buy. The main factor to achieve low prices is low cost. Cost advantages can be obtained through lower raw material prices than competitors, higher production efficiency, lower labor costs in the region, or advantages in distribution costs. Juices Beverage companies can reduce the cost of activities in the value chain by integrating organizational resources to achieve low-cost competitive advantages. The company's new product business and existing business can share resources, such as production equipment, distribution channels, convertible Brands, etc., will greatly reduce costs. In addition, cost advantages can also be obtained through OEM production. On the one hand, companies use their scale strength through professional OEMs to produce high-quality, low-cost products, reduce their own investment in fixed assets, and More resources are put into market development to achieve the separation of production and sales; on the other hand, economies of scale can be formed in a short period of time. When Huiyuan entered the international mid-to-high-end market, it also chose to cooperate with multinational companies to produce and sell OEM products. It is a strong supplement to its own brand.

3. Brand management strategy. If fruit juice beverage companies want to achieve rapid development, the most critical thing is to carry out brand building. Only based on the brand can consumers The recognition of products has increased from perceptual to rational, from impulse buying to selective buying, forming brand loyalty. Fruit juice beverage companies can adopt the following brand management strategies:

(1) Lead the brand with accurate image positioning Development. Accurate image positioning is the basis for successful brand management. Consumers choose a brand precisely because its image positioning meets the psychological needs of consumers. Looking at the successful companies in the juice drink market, Huiyuan represents 100% juice. Mr. Juice represents high-concentration juice, Nongfu Orchard represents mixed juice, etc. These are the best proofs of accurate image positioning. Inaccurate brand image positioning, including too many and complicated products, will inevitably lead to a disordered image of the product. In addition, there are also It will cover products that already have brand advantages. Therefore, accurate positioning is the basis of brand management.

(2) Franchising is an effective way to improve brand value. This is mainly aimed at the international operation of fruit juice beverage companies. It is proposed that franchising plays a great role in brand expansion. Through unified brand operation and management, all resources can be accumulated to meet consumer needs to the greatest extent. For example, Coca-Cola signs a franchise contract through a joint venture with an outstanding local beverage company, and then its Selling products in specific areas while maintaining product brand development. This strategy cleverly combines brand expansion and corporate expansion, creating the glory of "Coca-Cola" and achieving great success in international operations. Juice drinks Enterprises can learn from this practice and cooperate with outstanding local enterprises, sign local dealers, use existing brands to penetrate into the local market, implement brand expansion, extend brand value, and develop international markets.

(3) The inner brand spirit is the core of the brand. The real core of the brand lies in the inner brand spirit. When consumers buy brand products, they also buy trust in the company. When a brand becomes the brand spirit of the target group, this will Reaching the highest level of the brand is the fulcrum for forming high brand loyalty. At present, the biggest problem in brand building for fruit juice beverage companies is that they are easily imitated or replaced by new products appearing on the market. In fact, in the early stages of development, companies should not Launching different products in different market segments is not only costly, but also faces high market segment risks. Manage one type of product carefully, use it to build brand culture, convey corporate philosophy, and then use the already solid Product image and brand culture to open up new markets, this will have the effect of getting twice the result with half the effort.

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