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Trends in the sector
The organic food sector has grown tremendously in the last two decades. This is attributable to various factors such as the changing dietary habits among the masses. The change has resulted in an increased demand for organic food. Studies have linked several cancerous ailments to the consumption of genetically modified food (GMF).
Fear among the masses has resulted in a significant proportion of the people reverting to organic food. This has driven the demand for organic food upwards over the last two decades. Companies that deal with such products have experienced relentless growth in demand for their merchandise. This trend is expected to persist as the public becomes aware of the nutrition value of organic food stuffs.
Entities in this sector will raise customers’ awareness on the nature of their commodities. Raising awareness that their commodities are organic will resonate well with their potential clientele. Overall, entities in this sector will market their commodities on the basis that they are organic. Thus, they possess more nutritive value than inorganic products (Dunn-Georgiou 34).
Porter’s model
The increase in demand has resulted in a robust organic food industry. Growth of the organic food industry has various implications on the firms or entities that operate in it (Dimitri and Greene 7). Michael Porter’s model seeks to analyse how various factors impact on an organization’s future.
These environmental factors include rivalry among firms in the sector, entry of new firms, the bargaining ability of the clientele, the bargaining capability of the suppliers and the threat posed by substitute commodities. The lucrative nature of this industry has attracted new investors (new entrants). New entrants are a threat to entities in the organic food industry.
Firms can bar new entrants by raising the cost of entry into the sector. Nevertheless, there are no such costs that may prevent entry of new firms. Subsequently, new organizations have become a real threat to companies in the organic food sector. The entry of new firms has increased the number of players involved in the sector. This has bred rivalry.
Rival companies spend funds as they pursue dominance in a sector or guard their market segment. The rivalry may translate to slashing of prices to unsustainable levels. Such a strategy will result in the powerfulentity driving weaker firms out of business. Though such a strategy is unethical, it is utilised by entities seeking a monopolistic status.
Once an entity attains a monopolistic status, it is always a threat to other smaller firms. Another threat to firms in this sector is their clients. If customers have a bargaining capability over the companies, entities in this sector will have to lower prices.
This will result in lower revenues for firms in this sector. Lower revenues lead to reduced profitability for firms and investors. If such a trend persists, many firms or investors may pull out of the sector.
Suppliers are a vital component in any industry. They provide inputs that entities in this sector process for sale to clients. They pose a certain threat to organizations in this sector. If the suppliers’ bargaining capacityrises, they will charge more for their inputs. This will have several implications on the firms that operate in this sector. These firms will encounter higher costs of operations.
Hence, diminishing the profitability margin. Reduction in the profitability margin will trigger closure of entities that cannot break even. The final threat to firms in this sector is substitute goods. These are commodities that will deliver the same nutritional value as the food produced by the organic firms.
Commodities produced by entities in this sector are unique. Hence, substitute goods pose no real threat to entities that operate in this sector (Willerand Sorensen 65).
Creating a competitive advantage
SWOT
The key strength of this sector is that it has created a unique niche, which non-organic food companies cannot take over. The market segment created by the organic food sector has been expanding rapidly. The expansion implies that the purchaser is informed of the kind of commodities sold by firms in this sector. This market segment has a massive potential as indicated by the statistics.
However, it will require the industry players to create awareness among the potential clientele. The masses are more willing to try out organic products owing to the effects of GMF. This presents a key opportunity for the industry. The firms in this sector should exploit this opportunity through advertising that creates awareness on the nutritional value of their products and absence of side effects.
This industry also has weaknesses. The products sold in this sector require a lengthy time to grow while some are seasonal. This hinders all-year production, which is common in inorganic products. Finally, advertisements to dismiss the nutritional value of organic products may pose a serious threat to the success of firms in this sector (Milbrodt 132).
Based on the SWOT analysis, this industry’s competitive advantage lies in creating customer awareness on the nutritional value of organic products. Creating awareness will require elaborate promotions, which targetthe clients that are likely to shift their preferences based on timely promotions.
Works Cited
Dimitri, Carolyn and Catherine Greene. Recent Growth Patterns in the U.S. Organic Foods Market. Washington D.C: Economic Research Service, 2002. Print.
Dunn-Georgiou, Elisha. Everything You Need to Know About Organic Foods. New York, NY: The Rosen Publishing, 2002. Print.
Milbrodt, Carola. Organic Food Industry in China – Current State and Future Prospects. Muchen: Verlag Grin, 2005. Print.
Porter, Stanley and Jason Robinson. Hermeneutics: An Introduction to Interpretive Theory. Grand Rapids, Mich: William B. Eerdmans, 2011. Print.
Willer, Helga and Neil Sorensen.The World of Organic Agriculture: Statistics and Emerging Trends 2008. New York, NY: Earth Scan Publishing, 2008. Print.
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