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Porter Five (5) Forces Analysis is a strategic management tool to analyze industry and understand the underlying levers of profitability in an industry. Australian Vintage Ltd managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Australian Vintage Ltd competitive advantage and long term profitability in Food, Beverage & Tobacco industry.
Australian Vintage Ltd is one of the leading Australian firms in the Food, Beverage & Tobacco sector. Over the years Australian Vintage Ltd has redefined the ways of doing business in Food, Beverage & Tobacco industry. Australian Vintage Ltd is listed on the Australian Securities Exchange (ASX) and have the stock market ticker " AVG ".
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In his revolutionary article in Harvard Business Review (HBR) - "Five Forces that Shape Strategy", Michael Porter observed the five forces that have significant impact on a firm's profitability in the industry it operates in. The Porter Five (5) Forces are -
Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how Australian Vintage Ltd can build a sustainable competitive advantage in Food, Beverage & Tobacco industry. Managers at Australian Vintage Ltd can not only use Porter Five Forces to develop a strategic position with in Food, Beverage & Tobacco industry but also can explore profitable opportunities in whole Food, Beverage & Tobacco sector.
New entrants in Food, Beverage & Tobacco brings innovation, new ways of doing things and put pressure on Australian Vintage Ltd through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Australian Vintage Ltd has to manage all these challenges and build effective barriers to safeguard its competitive edge.
All most all the companies in the Food, Beverage & Tobacco industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Australian Vintage Ltd can earn in the market. Powerful suppliers in Food, Beverage & Tobacco sector use their negotiating power to extract higher prices from the firms in Food, Beverage & Tobacco field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Food, Beverage & Tobacco.
Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Australian Vintage Ltd profitability in the long run. The smaller and more powerful the customer base is of Australian Vintage Ltd the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.
When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.
If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Australian Vintage Ltd operates in a very competitive Food, Beverage & Tobacco industry. This competition does take toll on the overall long term profitability of the organization.
By analyzing all the five competitive forces Australian Vintage Ltd strategists can gain a complete picture of what impacts the profitability of the organization in Food, Beverage & Tobacco industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail Australian Vintage Ltd 's managers can shape those forces in their favor.