8. SWOT ANALYSIS
SWOT Analysis of Spice Industry
1. Strengths
It is one of the fastest f astest 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. Weakne Weakness ss
The products can’t be stored for long time.
Environment factor affect the raw materials and thus the final product may be affected.
Trans Transpo port rtat atio ion n cost cost is high higher er as comp compare ared d to other other industry.
3. Opportunit Opportunities ies
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.
