This part of the report will evaluate the industrial environment of Foodstuffs by the use of Porter’s five forces analysis. As mentioned previously, these include the threat of new entries, threat of rivalry, threat of substitution, bargaining power of the buyers and bargaining power of the suppliers.
Power to bargain among suppliers: As per Porter (1979), the more there is significance of suppliers, the more they can be stronger. Therefore, the business of Foodstuffs is known to have low dependence upon the key suppliers which mean that the power to bargain among suppliers is weak. The key reason is regarding significant value of share in retailing market in New Zealand and there is sale of many products across the industry. Supermarkets have been wielding substantial power to bargain among the key suppliers and there is a threat. The threat is that this power might be used in a way of affecting the competitive viability and vibrant market of supplier. This will turn out to be detrimental to the consumers. As the suppliers have key reliability to sell their production by supermarkets, the power to bargain among suppliers and supermarkets deals with a substantial imbalance.
Power to bargain among customers: Majority of the customers of Foodstuffs include individual purchasers who are known to have an extremely strong power of bargaining. Miranda et al. (2005) identified that customers of strong power enable the company to decrease the price in attributing the purchases across the stores of Foodstuffs. To meet the needs of the customers, delivery of products at low price is among the major strategies of Foodstuffs.
Threat from new entries: For Foodstuffs, threat from new entries is not considered as significant due to a number of reasons. The business has been set up such that a vast share in the related market is covered by the organization. The Group is based in South Island and North Island, with a collective control of approximately 52 per cent of the grocery market of New Zealand. Hence, this makes threat from new entries low.
Threat from the substitution of services and products: There seems to be an effective duopoly in the supermarket industry of New Zealand. This refers to the fact that the only real competitor of Foodstuffs is the supermarket chain of Australia, Progressive Enterprises. Hence, this makes the threat from substitution of services and products extremely low.
Threat from rivalry: The threat from rivalry is extremely low as Progressive Enterprises and Foodstuffs cover 98 per cent of the shares in the market.