Step+2+-+Strategic+Analysis

__**Strategic Analysis**__
 * Porter’s Five Forces Analysis **

Porter’s Five Forces is a framework developed by Michael Porter for industry analysis and business strategy development. It draws upon Industrial Organization (IO) economics to summarize five forces that determines how competitive a market is. The intensity of competition can help determine the attractiveness of an industry which also refers to the overall profitability of the industry. The combination of these five factors drive down overall profitability and a very “unattractive” industry would be one almost like “pure competition” in which profits of all firms in the industry are all almost zero (vectorstudy.com).

**1. Threat of new entrants. ** The possibility that new firms may enter the industry also affects competition. In theory, any firm should be able to enter and exit a market, and if free entry and exit exists, then profits always should be nominal. In reality, however, industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market (vectorstudy.com). Current ketchup industry is an oligopolistic market in which a small number of competitors dominate the marketplace (as Heiniz, Hunt’s, and delmonte own 80 percent market shares) and compete with like products and services. Oligopolies commonly have several barriers to entry. Cost advantages for the dominant few, government regulations, brand identity, and capital requirements are some of the common reasons smaller competitors struggle to infiltrate the market against a few large established industry giants. Therefore, new entrants are not real threats in the ketchup industry.

In Porter’s model, substitute products refer to products in other industries. As more substitutes become available, the demand becomes more elastic since customers have more alternatives. In ketchup industry, salsa can be a possible substitute for ketchup but it seems to be no real threat to ketchup.
 * 2. Competitive rivalry within an industry. **  The ketchup industry is not very competitive because, as mentioned above, it is an oligopoly. However, t he recipes of ketchup and the ingredients used to make it are usually the same, and low level of product differentiation is associated with higher levels of rivalry.  Thus, Hunt's ketchup as the second leading company in the industry needs to set up an objective to gain its market share by possessing competitive advantages over its rival companies such as Heinz and Del Monte (  quickmba.com).
 * 3.Threat of substitute products. **

The bargaining power of customers is the impact that customers have on a producing industry. The bargaining power of customers is relatively low in an oligopolistic industry because companies are usually price setters rather than price takers, and it is not easy for customers to move on to other companies’ products since there is only a few number of well-known branded companies that produce ketchup.
 * 4. ** **Bargaining power of customers. **

A producing industry requires raw materials – labour, components and other supplies. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price. Suppliers for Hunt’s ketchup may include suppliers of tomatoes, labour, and other ingredients of ketchup. Suppliers’ bargaining power for Hunt’s ketchup are relatively weak because there are many competitive suppliers, it is fairly simple for the company to find a new supplier if the current supplier charges at a price that’s not competitive enough. **What are their needs? ** The needs of target audiences are healthier, cheaper, and better-taste ketchup than other companies’ in the same industry such as Heinz and Delmonte.  **How can the organization fulfill the needs of the Target Market?** Hunt’s ketchup can fulfill the needs of the target market by adding natural ingredients instead of artificial flavours. Hunt's ketchup actually removed high fructose corn syrup from its ingredients in 2010. The new ingredients are "tomatoes, sugar, vinegar, salt and other seasonings. They also have launched a new product that contains less salt in it. If they keep struggling to find a new way to make a healthier ketchup as they have done so far, Hunt’s can fulfill the needs of the target market.
 * <span style="font-family: 'Times New Roman',serif; font-size: 11pt;">5. ** <span style="font-family: 'Times New Roman',serif; font-size: 11pt;">**Bargaining power of suppliers**.