Chiquita Brands - Porters Five Forces
Case Analysis Outline
Case Name: Chiquita Brands International
SECTION 2
Industry Analysis: Tools for assessing opportunities and threats in the industry (task) environment.
Porter’s 5 Forces Driving Industry Competition:
1. Threat of New Entrants
It has proved to be difficult for new companies to enter the banana industry. Therefore, there is no strong threat of new entrants into the market. This is due to several factors and entry barriers that exist. These include:
a. Banana industry is very concentrated with six companies controlling almost all of the global banana market.
b. These six companies that control the market are vertically integrated and control the production and distribution of their crop. Therefore, there is little threat of entry on either the upstream or downstream segments of these companies value chain. In addition, this makes access to distribution channels difficult for new entrants.
c. The capital requirements needed to establish a presence in the industry are substantial. Companies need to invest in land, crop management techniques and crop disease control, transportation technologies and methods, and communication systems.
d. Economies of scale – Companies in the banana industry have achieved economies of scale due to their size and the fact that they produce one variety of bananas in large quantities.
e. Existing companies in the industry have formed strong relationships with governments in the regions in which they produce their crop. This could make it difficult for new entrants to enter these markets.
f. Limited land resources.
g. Labor intensive industry.
h. Absolute Cost Advantages.
2. Rivalry Among Existing Firms
Competitors within the banana industry watch each other very carefully. This is because there are only a few competitors within the industry and their main product is one that is considered a commodity and cannot be differentiated. Therefore, the main dimension of competition has been
Case Name: Chiquita Brands International
SECTION 2
Industry Analysis: Tools for assessing opportunities and threats in the industry (task) environment.
Porter’s 5 Forces Driving Industry Competition:
1. Threat of New Entrants
It has proved to be difficult for new companies to enter the banana industry. Therefore, there is no strong threat of new entrants into the market. This is due to several factors and entry barriers that exist. These include:
a. Banana industry is very concentrated with six companies controlling almost all of the global banana market.
b. These six companies that control the market are vertically integrated and control the production and distribution of their crop. Therefore, there is little threat of entry on either the upstream or downstream segments of these companies value chain. In addition, this makes access to distribution channels difficult for new entrants.
c. The capital requirements needed to establish a presence in the industry are substantial. Companies need to invest in land, crop management techniques and crop disease control, transportation technologies and methods, and communication systems.
d. Economies of scale – Companies in the banana industry have achieved economies of scale due to their size and the fact that they produce one variety of bananas in large quantities.
e. Existing companies in the industry have formed strong relationships with governments in the regions in which they produce their crop. This could make it difficult for new entrants to enter these markets.
f. Limited land resources.
g. Labor intensive industry.
h. Absolute Cost Advantages.
2. Rivalry Among Existing Firms
Competitors within the banana industry watch each other very carefully. This is because there are only a few competitors within the industry and their main product is one that is considered a commodity and cannot be differentiated. Therefore, the main dimension of competition has been