Industry Analysis: Tea Industry Essay

6674 Words Nov 12th, 2010 27 Pages
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1. Introduction:

Situation analysis involves evaluating the situation and trends in a particular industry or company's market. We have to consider two things while situation analysis 1. Company’s external or macro-environment • Industry and competitive conditions 1. Company’s internal or micro-environment • Competencies, capabilities, resource strengths and weaknesses, and competitiveness. Industry and competitive analysis uses a tool kit of concepts and techniques to get a clear fix on key industry traits, the strength of competition, the drivers of industry, change, the market positions and industries profit outlook. This tool kit provides a way of thinking
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But as there is scarcity of land for tea production, firms are in a position to sell off their gardens at a high price.

← Degree of vertical integration

When the buyers can use the threat to supply their own needs through vertical integration as a mechanism for forcing down prices then the buyers have more bargaining power (Hill & Jones, 2002). Tea buyers are not in a position to threat to vertical integration to force down prices due to the auction system. All companies have to purchase tea from the auction. Even if any buyer has its own tea production, they need to purchase from auction. Only James Finlay Bangladesh Ltd and Duncan Brothers are allowed to collect their tea from their own gardens based on their local and export demand – the rest of the tea of their gardens. So if even any company invests in garden and start tea production still it needs to purchase from auction.

← Product characteristics

High standardized. As the product, tea comes from the garden, so they are basically identical but still it depends on the buyer’s perceive as they buy it by testing.

← Scale economics

The cost advantage associated with large volume of output is called economies of scale. Cost reduction through mass production of standardized tea and spreading of fixed cost such as land, building, factory, administrative expenses, employee welfare, etc over a large production volume

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