Five Forces Model Essay
Porter’s Five Forces Model was created to act as a framework for industry analysis and business strategy development. Porter singled out five different forces that impact competitive intensity which portrays an image of the overall attractiveness and profitability of a market. To aid in our evaluation of Nestle and its status in the industry, we will apply Porter’s Five Forces Model to the company.
Threat of New Entrants
The food processing industry is very large and competitive; it is not uncommon for firms within the industry to do quite well. As a result, many companies enter into the market every year in an attempt to gain a portion of the profitable market. Luckily for Nestle, the company has been around for …show more content…
Bargaining Power of Customers Customers have a large amount of bargaining power regarding their consumption of Nestle products. As stated previously, there are close substitutes for Nestle products which allows for the preferences of the customer to be very powerful. Nestle understands the power of the customer and has taken specific steps to meet the needs of its products consumers. Specifically, Nestle is incorporating health and wellness into the creation of its products as society has begun to grown more health conscious.
Competitive Rivalry within the Industry Nestle is a powerhouse is the food processing industry but so are Kraft Foods and Groupe Danone. These companies, among others, are in a constant and continuous battle to outperform one another. Regarding advertising alone, these companies spend hundreds of millions of dollars in an attempt to appear more desirable than the other companies. Rivalry is fierce in the food processing industry and this is a good thing for consumers. As long as these companies continue striving to one up one other, consumers will continue to enjoy ever improving product lines. When applied to Nestle, Porter’s Five Forces Model depicts a competitive but profitable