Fresh Connections

I am going to conduct a 5-forces analysis of the industry "Fresh Connections" is involved in, that is to say the fresh food industry. These forces help us to analyse everything from the intensity of competition to the profitability and attractiveness of the industry. We are going to use this model to better understand the industry in which "Fresh Connections" operates. So, the five forces are rivalry, buyer power, supplier power, barriers to entry and threat of substitutes.

1) The rivalry among competing sellers

First and foremost, competitive rivalry describes the intensity of competition between existing firms in an industry. In the fresh food industry, the intensity of rivalry is influenced by different characteristics. Price constitutes an important point. Firms in this industry can raise on lower prices to gain a temporary advantage. Prices are heterogeneous because they depend on sales volume. Big companies can reduce their prices by this way. An other factor is experience: buyers are reassured when a firm is involved in the business for many years. Brand identification tends to reduce rivalry. However, there are high levels of product differentiation which is associated with low levels of rivalry. Indeed, fresh food industry is characterized by a lot of diversity. We can find many recipes available in different sizes and volumes, for every taste and budget, and Fresh Connections is in this case. There are also specialized products, for example low-fat meals and nutritional health products. Quality plays an important role in this industry too. People who appreciate a product will buy it again easily.

Moreover, the industry is quite innovative because old products are constantly improved and new products are regularly available. Novelty seems essential: to be the first firm to commercialise a product in the fresh food industry give more forces. Firms have to think creatively about the packaging. This one has to be easy to open, hold. It has to inform the buyer about conservation in a clear manner. A good packaging gives some use advices, is original and has an environmental aspect. These details make the difference among competitors.

Furthermore, different cultures, histories and philosophies among rivals make this industry unstable. There is a great diversity of rivals. Each of them provides products with their own quality. They also do not provide the same kinds of products. The industry is populated by firms that provide just soups, sauces and graves or salads, by firms that are associated to the production of side dishes and by firms that are involved in the production of desserts or food for the centre of the plate. Others can provide large product offerings. The mix of philosophies about mission has created rivalry: these firms can have the same buyers but their products are different. In fact, in this industry, firms have to improve product differentiation, improved features, implementing innovations in the manufacturing process and in the product itself. Fresh food buyers are looking for recipes that would be made at home. So, the industry has a large number of firms that increases rivalry because more firms must compete for same customers. Nevertheless, these firms generally do not have similar market share. They have their own strategies and forces. But we can add that switching costs are low and increases rivalry. A customer can freely switch one product to another.

The geographic scope of competitive rivalry is particular due to the difficulties and the high cost inherent in transporting fresh products. This is the reason why firms are usually regional. Producers have to sell goods as soon as possible because of the highly perishable nature of these products. If other producers, in the same geographic area, are attempting to unload at the same time, competition for customers intensifies. Besides, the fresh products industry constitutes a growing market because more and more people do not have time to cook and eat outside their home. Firms are able to improve revenues simply because of the expanding market.

As for services, firms have to be able to ensure their orders because if they cannot, customers will appeal to an other firm and even keep it for the future. So, the availability of the products is a big challenge in the fresh food industry. Firms which take responsibility for the delivery and deliver on time can improve their market share. Rivalry exists for other services like product guaranty: customer can return the products without cost if he finds some defaults. The competition is also defined by conditions of payments, promotional offers, phone advices. The development of a web site can be interesting to promote the brand and constitutes an other place. The firm's web site can be used for communicating the mission and vision statement of the company.

2) Competitive pressures stemming from buyer bargaining power and buyer-seller collaboration

The power of buyers is how much pressure customers can place on the business. Firms in the fresh food industry can serve many customers segments like supermarket chains, organic markets, specialty grocers, food service operators, "co-pack" companies... So, there is a quite large number of buyers that decreases the power of each of them. Customers might have power if they purchase the product in big volumes. Big volumes are typically handled by the mass manufacturers but they do not represent the majority of the firms involved in this business. Large supermarket chains want customized foods of high quality, but they are more concerned with price. They are price sensitive. The problem is that retailers are an important buyer of fresh products. Switching to another competitive product is simple for them because of the competition in the U.S. food industry. On the other hand, quality and research and development are very important for buyers like restaurants, and Fresh Connections tries to focus its efforts on this particular segment. There is significant buyer switching cost because these products are not standardized and buyer cannot easily switch to an other product. They will have to pay again for development costs to switch the products. Besides, buyers are quite powerful insofar as substitutes are available, there is good buyer information, but fresh products are highly differentiated.

3) Competitive pressures stemming from supplier bargaining power and supplier-seller collaboration

The supplier power is how much pressure suppliers can place on the business. The fresh food industry requires raw materials and suppliers. Suppliers, if powerful, can exert an influence on the industry, such