Strategic Management

Introduction

Industry Analysis

The industry analysis for RBBL at best can be explained by the Porter’s Five Forces Model. Following are some of the analysis on that basis.

* Threat of new entries. In the consumer goods industry there is the existence of established incumbent companies that continuously try to discourage potential competitors from entering the industry. The companies operating in the industry threaten rivalry on price competition.

* Brand loyalty: In the case of consumer goods industry buyer’s preference for the products of incumbent companies is high which created brand loyalty. This brand loyalty was created by companies like Unilever, Square, ACI, and Reckitt Benckiser through continuous advertising of brand and company name, product innovation and emphasis on high quality.

* Economies of scale: The big players in the FMCG sector have cost advantages associated with large output. The source of scale economies include mass production, spreading of fixed cost and economies of scale in advertising. So small firms trying to enter the FMCG sector faces the dilemma of either entering on a small scale and suffering a significant cost disadvantage or taking a very large risk by entering on a large scale and bearing significant capital cost. A further risk of firms wanting to enter in large scale is that the increased supply of products will depress prices and result in vigorous retaliation by established companies.

* Switching cost: In terms of switching cost it can be said that the FMCG sector has low switching cost for which consumers cannot be completely locked in to the product offerings of incumbents, if new entrants offer better products.

* Absolute cost advantage: The incumbent companies which include Unilever, Square, ACI, RBBL and Sanowara etc have an absolute cost advantage relative to potential entrants. The sources of absolute cost advantage include:

a) Access to cheaper funds because of their reputation and...