Outsourcing and Five Forces
11th, November, 2012
Outsourcing and Five Forces
Section 1: Snack Food Industry Analysis
Snack food industry is a potent illustration of a diverse and open market. This section discusses the current US market and the five forces affecting this industry. Additionally, the essay provides the Porter diagram and researches the strengths and weaknesses for these forces. Finally, it discusses some potential driving forces in the industry.
To some extent, the industry has shown a remarkable growth with consumers having an expanding preference of the food market with less time for preparation. The following diagram summarizes the Porter’s five forces for the snack industry analysis. First, there has been a stiff competition among rivals who emerged in the market to offer healthy options food. Rivalry in the industry creates a major concern of competitive pressure augmented by competitors, which in turn creates competitive advantage and better market position. The intensity of rivalry in the United States has been so high that, there are over 360 businesses competing in the snack industry (Chatman, 2009). As consumers have become more concern about healthy products, the industry continues innovating new products that are low in calories and fat.
Secondly, there has been threat of substitutes in other industries making the demand to be more elastic since clients have more alternatives. Thirdly, the buyer power of consumers creates competition in the industry. For instance, despite Coca Cola and PepsiCo producing similar drinks they are competing because of adopting different ideology in targeting their customers. The different preferences of buyers have created a sub-competition in the industry. However, adopting strong marketing strategies have been substantial for attracting a wide population.
Fourthly, the industry has a strong effect of suppliers’ power in that an upsurge of raw materials prices such as sugar, wheat, and oil affects the prices of snack products. Lastly, threat of new entrants is quite strong thus the industry has emerged in the market with special offer and pricing that attracts consumers.
There are several factors driving change in the industry. First, studies and researches of encouraging people to opt for healthier alternatives to snack foods are affecting the marketing and operation of snack foods industry. The subsequent factor is that consumers are looking for the best brand when buying snacks, which makes a massive effect on sales. Thirdly, the high concentrates of new innovation in this industry attracts consumers to try new trends and flavours. As a result, this makes a positive impact on market shares and sales with many consumers trying new innovations. Lastly, current economic status affects people eating habits. For instance, many people prefer snacks to other foods because they are convenient and less expensive compared to other products.
Nissan and IBM are examples of two companies in different industries that have an outsourcing agreement. The two companies extended a contract to outsource chain activities signed in 1999 to 2012. As part of the deal, the IBM promised to manage network services, desktop services, dealer systems, and other infrastructures for Nissan industry. Accordingly Nissan purchased various server systems from IBM. IBM Company extended its services operations to Nissan with infrastructure support from various sites such as India, Brazil, Bangalore, and Sao Paulo. The agreement comprised a contract of the two companies having chosen activities to outsource.
Nissan industry established the need to handle over the management of IT systems to IBM that in turn promised to use its operating centres. Arguably, this agreement seems to threaten the Nissan competitive capabilities because by contracting out their information technology to IBM, the company will be insignificant in IT. Nissan would receive less recognition in technology implementation and enhancement that regard distinction features in the automotive business. Additionally, there would be a high profit margin in IBM taking over the portion of Nissan’s information systems. However, this initiative will create a platform for Nissan to implement and utilize the new technological innovations of the IBM’S competitive IT expertise. As a result, Nissan will have a more business oriented pattern.
Conclusively, the outsourcing agreement cannot be accomplished without effective management. Following the recent agreement with Japan Telecom, IBM commences the global infrastructure to support Nissan’s profitable growth. The IBM’S global industry around the world was to support Nissan achieve their objectives in the IT infrastructure. The main objectives for Nissan outsourcing IBM was to improve efficiencies, boost its IT infrastructures, and create an opportunity to have a logical monthly expenditure. In fact, Nissan was in serious financial crisis in 1999, but their choice to outsource with IBM transformed the industry. During this period, there were no signs for encouraging profit growth and outsourcing with IBM was definitely the defining point that transformed the Nissan industry.
Chatman, K. (2009, June 16). Snack Food Industry’s Success Factors.
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