Food And Beverage Industry In Sydney: Five Forces Analysis And VRIO Concept

Gourmet Demands and Product Range

Question:

Write an essay about the food and beverage industry.
 

Food and beverage industry in Sydney is a large industrial sector in the economical sector of Australia, in terms of both employment and financial contribution.Food and beverage processing in Sydney is one of the major manufacturing industries in Australia. To meet the gourmet demands, the members of this industry vary from multinational large sector to smaller section. This industry covers a large range of products, which include wine,confectionery, seafood,horticulture,dairy,grains, meat etc. (Moodie et al., 2013).The industry supplies this diverse variety of products to many distribution channels, like food ingredients, food service and retail. This industry also shows flexibility by meeting the consumer’s trends, like, value for money, convenience, wellbeing, healthy food through quick supply of the products. This industry is highly dynamic in nature, which is driven by the constant customers’ demands, like value, quality and diversity. The cultural and ethnic diversity of Sydney is reflected in their wide rangeof food products. In their food products the influences of Middle Eastern,Asian and European are found. The food certification standards and systems create foods with specificities including organic,halal and kosher. Internationally, the food and beverage industry in Sydney exports their products to 200 markets (Ronit& Jensen, 2014). Sydney has a good reputation of supplying natural and clean products with reduced chemical residues. Safety and quality are the supreme demands with safety strict standards enforced and regulated along with the supply chain.Excellent R&D facilities, both private and public, help in the innovation process through implementing different new products along with continuous improvement in production and packaging processes. A variable range of products are available in Sydney due to large climatic changes across Sydney from the temperate south tothe tropical north. Sydney has seasonal advantage while supplying in international markets.The Australian food and beverage industry has modified with marketing efforts, product development, packaging and innovative manufacturing. This industry is supported with world-class and reliabledistribution infrastructure and transport. In this assignment, Sydney’s food and beverage industry will be analyzed through “Five forces analysis” and the VRIO concept. 

Five forces analysisis a tool for developing business strategies depending upon the level and nature of occurredcompetitionin the industry. This tool is known as Porter’s “Five forces analysis”(Roslow& Nicholls, 2015). This name is derived from Harvard professor Michael Porter. The popularity of this tool is it helps to understand the business profit and the comparative analysis easily. Both the new entrepreneurs, who are planning to get into the business and the existed companies, utilize this tool to analyze their sustainability in the industry.

The five forces which have impacts on a company’s performance in a business or industry situations are (Galbraithâ€ÂEmami&Lobstein, 2013):

1. The bargaining power of suppliers
2. The bargaining power of buyers
3. The competitive rivalry in between the competitors in the industry
4. The threat of substitute products
5. The threat of newbarriersorentrants to get into the industry

To know the influence of Porter’s Five Forces model, each of the forces in this tool will be analyzed in Sydney’s food and beverage industry. 

Bargaining power of buyers:

The buyers can bargain more, where there are more shops of food and beverages. Theyhave option to try in other shops (Sacks et al., 2013). For example, if there is a long queue in one food shop, then the buyers will opt for another food shop which can be just next to it. In this case, the high number of shops to cater the buyers determines the bargaining power of the buyers.But this high bargaining power of the buyer is a disadvantage to the food and beverage shops operating at the place.

Export Markets and Quality Standards

Bargaining power of suppliers:

The suppliers in the food and beverage industry aremeat vendors,dairy produce and dough. In a market, where here is more number of suppliers, thebargaining power is low over there.Thelack of differentiation in between the products of the sellers determines the bargaining power of the low suppliers (King et al., 2013). So, in food and beverage industry this is the advantage.

Competitive rivalry among competitors:

This food and beverage industry plays as chock-a-bloc with the competitors. There are big brands, like Starbucks, KFC, McDonald’s etc and smaller and medium brands, including local bakeries and restaurants, which are providing a range of quick-eats and snacks(Teixeira et al., 2015).Thelargenumber of food shops selling quality products determinesthe high competition. 

The threat of substitute products:

Differenteating joints of food and beverages have the capability of selling ranges of food products, like sandwiches, burgers, drinks etc. So, there is a major threat to replace these products in the food and beverage industry (Kelly et al., 2013). The differentiation lacksamong the products determine the major threat of the replacements. For example, there is a competition in uniqueness in between KFC and McDonald. It is a disadvantage in this industry. 

An entrepreneur needs a complex set of permissions to enter into this industry. It is also necessary to modify the infrastructure with modifications. The uniqueness of the productsdifferentiates one food shop than the competitor that involves multinational chains.The number of established products and permissions are required to determine the low threat of new entrants(Freeman et al., 2015).Therefore, this is an advantage in a food and beverage industry.

VRIO concept:

VRIO concept is a tool, which can examine the internal environment of the industry. Barney and Hostelry (2006) describe this concept. According to them VRIO stands for four questions, and one shoals ask about a capability or resource to determine its competitive potential. In a broad way, VRIO concept is a much larger strategic scheme in an industry. Any organization begins with some basic strategic process, which are, strategic implementation, strategic choices, both corporate level and business level, external and internal analysis, and vision statement through objectives (Harrison & Jackson, 2013). This VRIO analysis results in a competitiveadvantageof the organizations in an operated market place. VRIO analysis comes under internal analysis. This concept is used to evaluate all capabilities and resources of an organization regardless of its phase in strategic model. VRIO, the name is derived from the initials of four question frameworks to know about the capability and resource of an organization to determine the competitivepotential. Those four questions are: Value, Rarity, Imitability (difficulty or ease to imitate) and organization (ability to exploit the capability or resource) (Walker & Walker, 2012). Like other industries, VRIO concept is also used in Sydney’s food and beverage industry to analyze its inner concept. In a competitive basis, these questions are given below:

Value:

In value, the enability of s resource in an industry is evaluated through its neutralizing the environmental threat or/and exploiting the environmental opportunity. The Sydney’s food and beverage industry holds a high value in accordance to the exploitation of available resources and its brands image (Ridoutt et al., 2016). It has helped this industry to evolve with the advancements.

Five Forces Analysis

Rare:

In rare form, the evaluation of an industry is done based on the controlling power of a small number of competeting industries. The analysis is based on the utility of the resources to make services or products or the rarity of the services or products. The utility of the resources in the food and beverage industry in Sydney are mostly franchise oriented (Bell et al., 2016). This industry is speeded through its breadth, but still they are controlled under proper guidance. In the food industry, those franchisees have to follow strictly the company rules. 

Imitability: 

In imitability, the evaluation is done based on the appearance of the resource towards the disadvantage indeveloping or obtaining. In the food and beverage industry, from products’ view, it is not hard to imitate, but the functionality of this industry is tough to achieve (Harris et al., 2013). 

In this evaluation, the procedures and policies of the industry are organized to support the exploitation of its costly-to-imitate, rare and valuable resources. The food and beverage industry in Sydney is always ready to exploit the new resources of the market (Baur et al., 2014). Through this, the organization structure is well maintained. It inefficiently supports its operation in the competitive market.

The types of resources, which are evaluated for competitive advantages are- organizational capabilities, intangible resources and tangible resources (Rothwell et al., 2015). 

Competitive nature of the Sydney food and beverage industry:

The competitive nature of the food and beverage industry in Sydney is analyzed through FiveForces model and VRIO analysis. 

Five Forces model:

From the above analysis through Five Forces model, the following scenario of competitiveness in Sydney’s food and beverage industry is presented (Richards et al., 2015):

• Low bargaining power of suppliers, which is an advantage
• High bargaining power of buyers, which is a disadvantage
• Low threat of new entrants, which is an advantage
• High competitive rivalry among competitors, which is a disadvantage
• High threat of substitute products, which is a disadvantage 

There are two advantages which are compared with three disadvantages. So, until a fast food and beverage company is not able to make unique products and build a reputation for hygiene and service, it will move out of the industry. The Porter’s Five Forces analysis highlights a good level of competitiveness and low level of attractiveness in the food and beverage industry. So, Porter’s Five Forces helps to assessthe competitiveness in the food and beverage industry(Swinburn et al., 2015). It permits the companies to evolve with new strategies, which will help to reducethe threat of substitutes,competition, suppliers’ and buyers’power and hinder the entry of newcomers. Any changes in these forces will compel the companies to evaluate their market situation again.  

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Freeman, B., Kelly, B., Vandevijvere, S., &Baur, L. (2015). Young adults: beloved by food and drink marketers and forgotten by public health?. Health promotion international, dav081.

Galbraithâ€ÂEmami, S., &Lobstein, T. (2013). The impact of initiatives to limit the advertising of food and beverage products to children: a systematic review. Obesity Reviews, 14(12), 960-974.

Green, R., Agarwal, R., Brown, P. J., Bajada, C., &Shashnov, M. (2015). Innovation Capability and the Food Beverage and agri-business sectors.

Harris, J. L., Sarda, V., Schwartz, M. B., & Brownell, K. D. (2013). Redefining “child-directed advertising” to reduce unhealthy television food advertising.American Journal of Preventive Medicine, 44(4), 358-364.

Harrison, P., & Jackson, M. (2013). Integrated marketing communications and power imbalance: the strategic nature of marketing to children and adolescents by food and beverage companies. In Advances in Communication Research to Reduce Childhood Obesity (pp. 33-76). Springer New York.

Jones, P., Hillier, D., & Comfort, D. (2015). Water stewardship and corporate sustainability: a case study of reputation management in the food and drinks industry. Journal of Public Affairs, 15(1), 116-126.

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King, L., Hebden, L., Grunseit, A., Kelly, B., & Chapman, K. (2013). Building the case for independent monitoring of food advertising on Australian television. Public Health Nutrition, 16(12), 2249-2254.

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Richards, Z., Thomas, S. L., Randle, M., & Pettigrew, S. (2015). Corporate Social Responsibility programs of Big Food in Australia: a content analysis of industry documents. Australian and New Zealand journal of public health,39(6), 550-556.