Analysis using Porter's National Diamond Model
In the competitive business market, every company wants to spread their products and services in the global market. Ribena, a beverage company in United Kingdom is planning to introduce its products in the market of China. Product selected for this purpose is Ribena plus that has wide range of Food drink products like Ribena plus immunity support, Ribena plus healthy bones, Ribena plus –vitamin A,C,E etc. In China there is huge scope for these types of drinks because people in China prefer the drink that gives them proper amount of vitamin and minerals. China soft drink market has gained huge market share and also shows a healthy performance in recent years (Ribena 2013).
Michael Porter’s National Diamond model framework is a tool for analyzing the organizations environment. It is one of the most significantly used theories to evaluate the market competitiveness of the country. This theory is mainly used by the firms that are planning to enter in the new functional environment and within the new institutional frameworks. Porter establishes the four factors to explain the viability of a country competing in the particular international market. Following is the analysis of diamond factors in relation to the country China (Liu, Zhang and Xu 2010).
Government and Factor Conditions: Government is the most important factor that affects the market in the particular country. Chinese government has made many marketing strategies to give a boost to the beverage companies and also encourages the international beverage companies to sell the products in China. Main aim of the Chinese government is to promote healthy competition in the beverage market so that the people in china have an option a chose from variety of products and its quality (Liu, Zhang and Xu 2010).
Demand Conditions: China is currently ranked first for its population and also for its economic development. Population in China are mostly employed and generally prefers the food and drinks that are readily available. A recent research report on China’s soft drink market states that Total Output Volume has increased by 10.73 % from year 2000 to 2012 (PRweb 2013).
Relative and supporting industries: Beverage industry in China has a very wide chain and it covers many other industries. According to porter, these external sources of supportive industries provide the network of specialised input providers, which become the true source of competitive advantage (Liu, Zhang and Xu 2010).
Competitors in the Chinese Market: Number of Chinese soft and fruit drink enterprises are very high and there is cut-throat competition between these enterprises.
To critically evaluate the internal environment of Industry, Porter’s five forces model is used. This model is introduced by Michael porter in 1980 and considered one of the most effective analytical frameworks for industry analysis. In this framework, five forces are the bargaining power of customers, threat of new competitors, the threat of substitute products and services, the intensity of competitive rivalry, and the bargaining power of suppliers (Partridge and Hunt 2005).
Threat of new competitors is high because of amount of initial investment to start the business is very low as compared to other industries. Also the intensity of competitive rivalry is very high because of presence of many big and small beverage manufactures. Customers in China posses very high amount of bargaining power due to presence intensive competition. Therefore companies are forced to put some additional offer to sell their products. There are many products that substitute the soft and food drinks and this fact contributes to the profitability level of Chinese beverage companies (Partridge and Hunt 2005).
Pestle analysis is used to evaluate the external factors that affect any company while entering into other market. PESTLE stands for political, economic, social, technological, legal, and ecological factors that affect the company external environment. Management of each company operating in Food and beverage sector has conducted the pestle analysis to gather the knowledge required for decision making. Following is analysis that shows the pestle analysis of food and beverage industry in China.
Political: Beverages like soft and fruit drink falls within the food category under FDA. China government plays a major role to regulate the operation of manufacturing of these products. There are potential fines for not meeting the set standard of laws defined in connection to these products and these fines are set by the government authorities.
Economic: Economy of China is very strong and it is growing in every part. Recession in global market has a least impact on the economy of China and China’s GDP is increasing constantly. The standard of living in China is very high that is main reason of inflation in China.
Social: Social factors involve changing attitudes and lifestyles. People of China practice healthier lifestyle and prefers healthy drinks. Therefore there is great scope of food and soft drinks in China.
Technological Change: It creates opportunities for new products and improves product quality. It also introduces new marketing techniques in the market like internet and E-commerce. Ribena can use this technology to market its products and can also reduce its production cost by adopting new methods of production.
At last it concluded that there is huge scope for growth and development of Ribena in Chinese market due to presence of high demand and market potential. This is analysed with the help of certain models like Pestle, Porter’s five force and national diamond model.
Liu, Y., Zhang, Y. and Xu, C. 2010. Analysis of the International Competitiveness of Chinese Medicine Industry Based on the Diamond Model. International Business Research 3(3), pp. 165-170.
Partridge, L. and Hunt, M. S. 2005. Strategic Management. Select Knowledge Limited.
PRweb 2013. China Soft Drink Market Total Output Volume Increased 10.73% YOY 2000-2012
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