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8.

SWOT ANALYSIS

SWOT Analysis of Spice Industry

1. Strengths

 It is one of the fastest growing industries.


 The exports of spice industry are increasing day by day.
 Easy availability of raw material.
 Less investment is required.
 Easily availability of manpower.
 No substitute available.

2. Weakness

 The products can’t be stored for long time.


 Environment factor affect the raw materials and thus
the final product may be affected.
 Transportation cost is higher as compared to other
industry.

3. Opportunities
 There is vast market to capture.
 Good foreign demand for the product.
 The market of packed spices is increasing day by day.

4. Threats

 Loose spices in market are major threat to industry.


 Stocking habits of consumers and not purchasing when
needed also affects sales.
 Cutthroat competition in industry is also a threat.
SWOT analysis of company

1. Strengths

 The “SWAD” Masala and instant mix are fresh, available


in attractive poly pack and of best quality.
 Prices of the products are less as compare to Ramdev
Food Products Ltd. & thus company gets price benefit.
 The company has a reputed name in the market.
 Easy availability of the products in market.
 Company gives various and attractive schemes.

2. Weakness

 Prices of the company’s product are more as compare


to loose products.
 There is no adequate contact with retailers in some of
the areas of North Gujarat.

3. Opportunities

 There is vast market to capture in state of Gujarat.


 The market of packed spices is increasing day by day.
 By increasing advertising and introducing new products
company can increase its sales.

4. Threats

 Loose spices in market are the major threat to


company.
 Stocking habits of consumers and not purchasing when
needed also affects sales.
 Another threat if from Ramdev Food Products Ltd., as it
has the same brand name.
 New companies entering in market is another threat.
9. PEST ANALYSIS

Political Legal

Change in tax structure, policy matters has got a profound effect


in this relatively undifferentiated industry. In the recent year’s
budget FM intended to levy excise in branded spices to the tune
of 8%, though this proposal had been rolled back but such kind of
taxes fosters the growth of loose market at the cost of branded
market.

Government’s strict regulation on quality entails the installation of


costly machines, which in turn leads to increase in prices of
branded product As a result of this the sale of loose spices
increases, it must be noted that we are not criticizing quality
policy of government but sale of low quality loose spices should
be checked.

Policy of different mandis from which the material is procured


changes from time to time, such a change affects the industry.

The spice getting industry was formerly a SSI reserve, which also
had it share of effects in shaping the industry.

The liberalization drive by government will also affect the shape


of grinding industry as bigger players like HLL and Nirma is
contemplating an entry in this market. Policy matter regarding
this industry is bound to change the face of spice grinding
industry.
As India is a member of WTO so it has the obligation of enforcing
product patent by 2005 AD. This will effect in many new
phenomenon emerging in this industry.

Economic Factors

The fate of spice grinding industry to a large extent depends on


monsoon. A favorable monsoon leads to low prices as a result of
which people opt for slightly better branded spices where’s if the
prices are high loose is sold more because of its slightly lower
prices.

Any national or international level change in situation leads to


speculation and widespread change in this industry.

Export scenario also affects the domestic industry, if exports are


high and profitable many big players focus more on exports and
competition gets diluted back home where’s a decrease in
exports leads to stiffer competition in domestic market.

Socio-cultural Factors

People are seeking quality products now a days and this has lead
to steady increase in packed spice market. Increase in consumer
attitude has lead to increase in brand acceptance and brand
awareness as people link it to quality and accountability. Such a
trend is favorable to packed spice industry.

Housewives drive towards convenience has also lead to increase


in packed spice business. A working housewife is not in a position
to grind the spices as it takes time and so she seeks convenience.
In today’s society as women are becoming more assertive and
career oriented the future of packed spice business looks bright.

Technology

Technology is supposed to be simpler in this industry but stircker


PFA and Agmark norms and US, and other ISO requirements
require more than the existing technology. Any other technology
change keeping in line with ISO and U.S. requirements may force
to change as almost all and those are involved in export market
with varying degrees of intensity.

During conventional grinding process there is a considerable heat


evolved which result in losses of volatile oil which adversely affect
the yield and quality of the product. This was the reason why
Ramdev and others came up with new technology with less heat
involvement. This had significant affect in shaping this industry.
10. PORTERS FIVE-FORCE MODEL

The model of pure competition implies that risk-adjusted rates of


return should be constant across firms and industries. However,
numerous economic studies have affirmed that different
industries can sustain different levels of profitability; part of this
difference is explained by industry structure.

Michael Porter provided a framework that models an industry as


being influenced by five forces. The strategic business manager
seeking to develop a competitive advantage over rival firms can
use this model to better understand the industry context in which
the firm operates.

THREAT OF ENTRY

Barriers of Entry

Economies of scale

The raw material cost is decisive in fixing the price of grinded


powder. The shroud procurement plays an important part in
determining cost. Economies of scale may play a part in cost
reduction but that is marginal & does not deter small players to
enter the market. Shroud procurement & not large scale
procurement is a key to competitiveness.
• Art indirect benefit of scale here is good relationship with
supplier of raw material & assurance of good quality

Product differentiation

Differentiation is a difficult job in the industry as it is a


commodity. MADHUR is tying to differentiate itself on the basis of
“Grinded stalk less chilly.” Still there is a hardly a creditable
ground for differentiation.

Big players may not have basis for differentiation against small
players. Big players have their grinding system far more superior
to small & cottage units as they use machines which generates
less heat during grinding & hence volatile oil which are an
essential nutrient.

Big players do not have differentiation amongst themselves, as


the production process is simple & uniform across the industry.

Access to distribution channel

It is very easy to get access to the distribution channel because


nobody owns the channel & no contracts are made with the
retailers to that effect
The initial investment required for starting a company s not too
much and raw material availability is adequate and thus too
many small firms comes into existence which affects the
market share of big and medium size firms. Labor required is
also available at cheaper rate and a very few skill labour are
required for the production mostly unskilled labour required
which also reduces the project cost. The cash for the product
sold comes back very fast to the company which attracts
more of new entrants.

The cash flow in the industry is very fast than any other industry
so that cash is coming very fast in industry so that these features
will attract more numbers of the competitors in the industry.

Government controls in the industry are very low rules and


regulations to be followed are less because of which there is free
entry and exit and thus threats area very high.

INTENSITY OF RIVALRY

Rivalry is intensive in this industry. Every price cut is matched by


subsequent price cut by other manufacturers.

Reasons for intense rivalry may be mentioned as follows:

1. A larger number of firms increase rivalry because more

firms must compete for the same customers and resources.


The rivalry intensifies if the firms have similar market share,
leading to a struggle for market leadership. E.g. Ramdev,
Madhur, Wonder etc.
2. Moderate fixed costs result in an economy of scale effect

that increases rivalry. When total costs are mostly fixed


costs, the firm must produce near capacity to attain the
lowest unit costs. Since the firm must sell this large quantity
of product, high levels of production lead to a fight for
market share and results in increased rivalry.
3. Low storage costs or highly perishable products cause

a producer to sell goods as soon as possible. If other


producers are attempting to unload at the same time,
competition for customers intensifies.

4. Low switching costs increases rivalry. When a customer

can freely switch from one product to another there is a


greater struggle to capture customers.
5. Low levels of product differentiation are associated with

higher levels of rivalry. Brand identification, on the other


hand, tends to constrain rivalry. Masala are basically
commodities & hence there is a lack of perceptible
difference among different offers. Even a small unit’s
product is, to a layman, identical to a big manufacture’s
product.
6. Industry Shakeout. A growing market and the potential for

high profits induces new firms to enter a market and


incumbent firms to increase production. A point is reached
where the industry becomes crowded with competitors, and
demand cannot support the new entrants and the resulting
increased supply. The industry may become crowded if its
growth rate slows and the market becomes saturated,
creating a situation of excess capacity with too many goods
chasing too few buyers. A shakeout ensues, with intense
competition, price wars, and company failures.

7. As many small units crop up during season rivalry becomes


intense at that time.
8. If we see the small players especially during season, who
grind the chilly in front of consumers which is the major
source of creating trust among consumer, This is one of the
differentiation tactics used unbranded, unpacked marketers
who by this way give tough competition to players.

Ramdev Masala is facing major competition from the Ramdev


Food Products Ltd. and the loose products (spices) in the market.
The RFPL is the market leader and thus the competition faced is
very high in every area and the loose spices too have greater
market share in many areas which effects the market share of the
packed spices. Apart from these as the company’s products are
available in four different groups there are many competitors in
each group affecting the company market share.

THREAT OF SUBSITUTE

In Porter's model, substitute products refer to products in other


industries. To the economist, a threat of substitutes exists when a
product's demand is affected by the price change of a substitute
product. Substitute products affect product price elasticity as
more substitutes become available, the demand becomes more
elastic since customers have more alternatives. A close substitute
product constrains the ability of firms in an industry to raise
prices. The competition engendered by a Threat of Substitute
comes from products outside the industry. While the threat of
substitutes typically impacts an industry through price
competition, there can be other concerns in assessing the threat
of substitutes.

In the spice industry the consumers are purchasing either the


loose spices or the packed spices to fulfill their needs and
moreover there is no substitute of the spices and hence there is
no threat of the substitute in the industry.

BARGAINING POWER OF BUYERS

Bargaining power of buyers is high owing the following reasons.

Product of industry is standard or undifferentiated.


There is low switching cost faced by buyers.

Retailers also have good bargaining power, as they are able to


influence buyer’s choice.

BARGAINING POWER OF SUPPLIERS

Supplier’s power is not high, as they are numerous in numbers.


Again any forward integration by supplier does not pose sever
threat as already many players are present. Further lack of
switching cost make their bargaining power even lower.

A producing industry requires raw materials - labor, components,


and other supplies. This requirement leads to buyer - supplier
relationships between the industry and the firms that provide it
the raw materials used to create products. Suppliers, if powerful,
can exert an influence on the producing industry, such as selling
its raw materials at a high price expropriating some of the
industry's profits. The following tables outline some factors that
determine supplier power.
The companies are purchasing the spices from the farmers. As
there is enough availability of raw material the company can
purchase it from the place where it find its cheaper as compare to
other place. More over as the spices are perishable in nature they
have to be crushed into powder as older it gets less price is
available for the same. Thus the suppliers too are ready to sale it
of as soon as possible. Because of all this reason the bargaining
power of suppliers is less or does not affect much.