Porter's five forces models - Essay Example

Porter`s five competitive forces include the bargaining power of buyers, the bargaining power of suppliers, threat of new entrants, potential substitute products and the level or extent of rivalry among the competitors. The model of five forces can also be used to analyze the bread making industry of the UK (Daft, R. et al 1991). The bread making industry of UK is one of the largest markets of the entire food industry and is worth approximately ?3.4 billion. The UK baking industry is divided into three sectors, large plant bakers which control 78% of the market, the in-store bakeries produce around 17% of bread and the master bakers or the craft bakers produce the remaining which is 7% of the bread produces in UK.

These three sectors of the industry are competitive and there is competition within each of these sectors as well which results in a high level of competition in the entire bread making industry of UK. The large plant bakers, for example, include three large plant manufactures and the largest of these is the Warburtons and together all of these control almost 3/4th of the large plant bakery sector. . The three main manufactures of bread in UK are Premier foods (Hovis), Allied Bakeries (Kingsmill) and the largest producer, Warburtons.

These companies produce 80% of the bread sold in UK and therefore, the level of competition between these industries is also high as they compete to cater to the larger portion of bread market in UK. Another force is threat of substitute products which is also high in this industry. According to the Federation of Bakers, everyday almost 11 million loaves of bread are sold in UK with a total volume of fewer than 4 billion units with a variety of almost 200 different bread products available for the consumers.

Therefore, there are a lot of substitute products available for the consumers of this market. As far as the bargaining power of suppliers is concerned, most of the bread sold in this market of UK is produced by local or domestic companies. As there are a number of dominant suppliers in the market (Premier foods, Allied Bakeries, Warburtons), they have a certain level of power over the market as together they control more than half of the market. They can exercise this power by collaborating and dividing the market amongst themselves.

As a result, they could even stop new companies to enter the market and could even set prices to earn high profits. Therefore, it is quite difficult for new companies to enter this industry as the market share of the industry has already controlled by the three dominant suppliers. As a result, new entrants would have a limited margin for expansion. Also that they might not be able to compete with these dominant suppliers as they already have positioned themselves