Amul Porters

Michael Porters Five-Force Analysis According to Porter (1980) a firm must be analyzed in relation to its industry.Factors outside the industry tend to influence all the industrys firms in the sameway and are thus not as important to study. To a large extent, industry structure governs the strategies open to the firms.The profitability and attractiveness of an industry is dependent of the level of competition. Competition in an industry originates from industry structure andgoes well beyond the behavior of individual competitors. According to Porter, each industry has a potential profitability and the profitabilityfor the firms is dependent on the competitive forces in the industry. Porter identifies five competitive forces that derive from the ambition to obtain as largeshare of the profitability as possible. The five forces are the foundation of thefive-force model. Porters Five-Force Model The major competitors of the Amul dairy include: Milk GayatriRoyalSardar UttamShreshtha Ice Crean VadilalHavmor 57 Kwality Walls MaxLocal & Regional players Ghee GayatriNestle Milk Powder Nestle Chocolate NestleCadburyThe success of the national and local competitors brands includes effectivedistribution system, advertising, good pricing policy etc. The factors ascribed byporter are: Threats of new entrants Bargaining power of suppliers

 Bargaining power of buyers Rivalry among competitors Threats from substitutesThese factors can be explained in context to GCMMF as below: Threats of New Entrants

Economies of Scale: GCMMF enjoys economies of scale, which isdifficult to match by any other competitor. It is because of this reason thatno regional competitor has grown to a national level.

Cost and Resource advantages: Amul dairy is co-operative society.That means cooperation among competitive is the fundamental principle.Amul dairy is managed under the norms of GCMMF and market the

58 products under the brand name Amul, which has a very good reputationat domestic and international level. Here, the raw material procurement isvery difficult for the new entrants. Consequently Capital requirement isalso high. Still new entrants are emerging such as domestic andinternational players. So the threats of new entrants are moderate.

Brand Preferences and Consumer Loyalty: There is an immenselevel of Brand Preference of Amul in the minds of the people. The level of preference specifically in the liquid milk sector is that they would go toother retailer if the retailer does not have milk.

Access to Distribution Channels: The distribution channel of GCMMF is a very planned and perfect one. For any new entrant to enter itwould be a very difficult task. For GCMMF the result is years of hard workand its investment in its employees as well as at different levels in thedistribution network.

Inability to match the technology and specialized know-how of firms already in the industry: The technology used by Amul is importedfrom Denmark. It is a state of art technology. To get this technology inIndia, a firm would require a huge amount of resources.

Capital Requirements: The total investment required in the industry ishuge and is a decision worth considering even for MNCs. The investmentdecisions cover the processing costs as well as the marketing costs. Tocompete with the brand Amul in India is difficult as Amul is synonymous toQuality. Bargaining power of supplier

The objective of Amul dairy is not profiting. As it is a part of co-operative society, it runs for the benefit of farmers those are the suppliersof milk and users of milk products. According the concept of thecooperative society supplier has bargaining power to have a good returnon his or her supply. However, supplier has limited rights to bargain withthe cooperative society because it is made and run for the sake of mass

58 products under the brand name Amul, which has a very good reputationat domestic and international level. Here, the raw material procurement isvery difficult for the new entrants. Consequently Capital requirement isalso high. Still new entrants are emerging such as domestic andinternational players. So the threats of new entrants are moderate.

Brand Preferences and Consumer Loyalty: There is an immenselevel of Brand Preference of Amul in the minds of the people. The level of preference specifically in the liquid milk sector is that they would go toother retailer if the retailer does not have milk.

Access to Distribution Channels:

The distribution channel of GCMMF is a very planned and perfect one. For any new entrant to enter itwould be a very difficult task. For GCMMF the result is years of hard workand its investment in its employees as well as at different levels in thedistribution network.

Inability to match the technology and specialized know-how of firms already in the industry: The technology used by Amul is importedfrom Denmark. It is a state of art technology. To get this technology inIndia, a firm would require a huge amount of resources.

Capital Requirements: The total investment required in the industry ishuge and is a decision worth considering even for MNCs. The investmentdecisions cover the processing costs as well as the marketing costs. Tocompete with the brand Amul in India is difficult as Amul is synonymous toQuality. Bargaining power of supplier

The objective of Amul dairy is not profiting. As it is a part of co-operative society, it runs for the benefit of farmers those are the suppliersof milk and users of milk products. According the concept of thecooperative society supplier has bargaining power to have a good returnon his or her supply. However, supplier has limited rights to bargain withthe cooperative society because it is made and run for the sake of mass

59 and not for individual benefit. But it is made sure that the supplier gets hisfair share of return. There is appropriate bargaining power of the supplier. In olden daysthere were not any kind of cooperative societies as the farmer wasexploited. But, nowadays the farmers rights are protected under thecooperative rules and regulations, which ultimately results in moderatepower of bargaining from the supplier. Bargaining power of buyers

Cost of switching to competitor brands:

The switching of brands isseen very much in products such as ice cream, curd, milk powders, milkadditives etc. but it can be seen comparatively less in liquid milk category.Even if the buyers shift to the other brands of milk, the value that they getis less than they would get from consuming Amul.

Large no. of buyers: Milk is a necessity product and hence is a massproduct. It has a considerable share of the rupee spent by any Indian.Moreover the buyers are spread evenly over the country and do not haveany bargaining power. Rivalry among competitors

Demand for the product: The demand of the products of GCMMF isincreasing at a very healthy rate. To stand against the rivalry GCMMF iscoming with a wide range of products.

Nature of Competitors: In different business category GCMMF facescompetition from different players. In the Milk powder category it facescompetition from Cadbury & Nestle, in the chocolate category also I facescompetition from Cadbury & Nestle. While in the ice cream market it facescompetition from Kwality Walls Max and Havmor. In butter and chesses it

60 faces competition from Britannia. Moreover in almost all categories thereis presence of local retailers and processors and milk vendors. Rivalryintensifies as each of the competitors has different lines and this would inturn depend on the importance the line holds for the competitor.

Mergers and Acquisitions: As such in the industry there are nomergers or acquisitions. However if any MNC wishes to enter through thisroute then the competition might be severe. Threats Of Substitute

Availability of attractive priced substitutes:

Different substitutes areavailable for different category of products. There is ample availability of low priced substitutes from local vendors and retailers. This is a frontwhere GCMMF is still finding hard to combat.

Satisfaction level of substitutes: Customers do consider theseproducts as equal on quality if not better then the products of GCMMF.Hence the rate of customers switching to the substitutes is very high.Moreover the buyers also can switch to the customers easily without anyhurdles.

Not immediate substitutes: Distant substitutes are present in manyof the categories of business of GCMMF. For example in the MastiButtermilk category it faces competition from cold drinks and ice cream.These 5 forces interact among themselves at different degrees over a period of time. Moreover it will get intense or loosen up depending upon the moves of itscompetitors, buyers, suppliers, etc. However GCMMF has been able tooutperform on almost all fronts excluding a few lines of business