Chapter 3 Worksheet
The concepts in this worksheet correspond directly with the text. If you do not understand the concept or
need to refresh your memory, please refer to the text. I provide the page reference for each of the criteria.
You should also use the CD-ROM for concepts that require more detailed explanation than the text
provides.
The purpose of the external analysis is to identify opportunities and threats for the industry you are
analyzing. Do not focus on the company under analysis. Focus on the industry in which the company
competes. Make sure your analysis of the facts leads to a logical determination of specific opportunities
and threats associated with the criterion you are analyzing. Consider each criterion from a strategic
perspective. In other words, does your analysis lead you to conclude how or in which ways does the
criterion under analysis create opportunities or threats for the industry or specific companies in the
industry? State the specific nature of the opportunity or threat. This will strengthen your analysis and
help you with your subsequent SWOT analysis.
Do not use speculative statements. Typical key words indicating speculation include: if, should, could,
would, and may. Avoid contractions in written business reports. You only use contractions in a business
report when it involves a direct quote.
Refer to the examples of prior case analyses provided on the web site to assist you with understanding the
desired quality of analysis and statement of opportunities and threats.
Macro-environment forces
Criteria
(Refer to page 74.)
The economy at large
(Address the economic conditions
during the timeframe of the case.)
Legislation and regulation
Facts
What does this mean?
Economy is growing in the
Memphis region.
Restaurant industry experiencing
growth in the Memphis region.
This creates an increase in total market
volume. This is a strong threat of new
entrants into the industry (Deal with the
threat of entry in question 2. This
question is asking you how the economy
is driving opportunities or threats for the
industry.) and also an opportunity to
grow total industry volume. While this
is true, I think you can be more specific
in the way you write the opportunity.
For example, “The strong economic
growth in the Memphis area will
increase the size of the market, draw
customers with prior knowledge of and
appreciation for specialty sausages, and
provides for increased disposable
income. These economic conditions
create strong opportunities in increased
market size, knowledgeable customers
and spending on specialty items.”
Please use this as an example of how to
write a specific opportunity.
Compliance with these regulations is not
overly burdensome to the industry,
though failure to comply can result in
The following regulatory
agencies impact the special
sausage industry:
1
Population demographics
(Population demographics analysis
relies on developing various
categories of the population and
analyzing their impact on the
industry. Typical categories include
gender, age, education level,
geographic location, and income
levels. In addition to population
demographics, this type of
categorization includes ethnographics and psychographics.
Marketing is the usual company
source for these types of analysis.)
Societal values and lifestyles
OSHA regulates standards for
employee work conditions.
FDA & USDA regulate standards
for maintaining the production
environment.
There is prolonged growth in the
Memphis region’s population,
resulting in an increase in urban
areas.
Increases in # of meals per capita
obtained from the food service
industry vs. “home-cooked”.
OK but you have not really
addressed the criteria. How do
the characteristics of the
population create opportunities or
threats for the industry?
Societal trends toward health and
fitness have a great influence on
food service industries.
“Urban” lifestyles are becoming
more predominant in the
Memphis region, resulting in an
increase in the importance of
fast, quality service over price.
significant fines and/or shutdown of
production facilities. Please make sure
you state the specific nature of the threat
or opportunity. If the criterion is neither
a threat nor an opportunity then say so.
Population growth leads to an increase
in total available market volume. This
is a strong threat of new entrants into
the industry and also an opportunity to
grow total industry volume.
Health trends provide an opportunity for
the industry to expand into a new,
expanding market segment.
This is an opportunity for high quality,
differentiated product lines. Please be
more specific in the nature of the threat
or opportunity. For example, Increased
focus on nutrition and healthy choices
will prevent potential customers from
choosing sausage as an alternate food
product. This is a threat to companies
unwilling or unable to develop products
or reach out to this customer segment.
Please use this example and the prior
example as general guidance for
reviewing and revising, if necessary,
all of your responses in the worksheet.
Technology
The basic equipment and
knowledge required for the
industry is readily available. The
major shifts in technology have
to do with new sausage flavors
being introduced by rivals.
Technology does not have a large
influence on this industry, except for the
threat of rivalry of new sausage flavors
introduced by rivals.
Please consider the internet and other
technologies that may apply to this
industry.
2
1. What are the Industry's dominant economic features (page 77)?
Please note that table 3.1 provides a sample profile of the sulfuric acid industry. Table 3.2 provides
examples of the strategic significance of each of the criterion. Make sure you know the industry you are
analyzing.
Criteria
Facts
What does this mean?
Market size
*462 Million pounds purchased in 1997
Large and varied market size with
*Retail segment of >2 billion annually.
several areas for specialization; flavors,
low-fat styles, and overall premium
A key fact you should include is the
quality products. Specialization will help
segmented nature of this industry. Some to capture niche markets over larger less
segments include the products (meal,
diversified national brand leaders. This is
nutritional value) and customers.
an opportunity for an existing
manufacturer to create extra sales
revenue by expanding into the specialty
area.
Scope of the competitive *Local; suppliers to specialty
Regional impact from 25 to 30 suppliers
rivalry
restaurants/retail
in the Memphis area. National
(The competitive scope
*Regional; brokers to distributors
competition from major suppliers who
criterion addresses
*National; major players with national
are able to compete with cheaper
geographic scope (Global,
reach and support from distributors
economies of scale and larger
National, Regional, and
*Large national competitors with brand
distribution channels and marketing
Local), product scope,
loyalty following
plans. Competitors are better able to find
market scope and so on.)
shelf space in retail outlets due to the
hold the retailing supermarkets have on
the industry (controlling up to 50% of
the market) Scope of competition
encompasses all levels. This is a threat
to the industry because of the great and
varied levels of competition within it.
You need to be specific in the nature of
the threats. What types of threats by
whom and for whom?
Market growth rate and
*National Industry growth rate of 18.3% The industry is in a growth cycle.
position in the business
in 1996
Current eating trends allows the creation
cycle
*Regional industry growth rate of 15.4% of specialized specific niche markets.
within the retail segment regionally
The ability to create and manage these
creating sales of 12.25 million (6.1
markets through specialization & brand
million pounds)
loyalty is beneficial to a smaller
*Industry in a growth cycle
manufacturer. This is an opportunity
within the industry for individual
manufacturers to grow and expand.
Once again, you need to state the specific
nature of the opportunity. To emphasize
this comment and to save me from
writing it repeatedly, look for this color
as an indicator.
Number of rivals and
Bryan
National
Larger regional and national competitors
their relative size
Jimmy Dean
National
tend to focus on increased daily sales
(Relative size refers to
Healthy Choice
National
from few products. Small manufacturers
the market share based
John Morrell
National
are then able to create greater specialized
3
on total sales for the
overall market or, when
applicable, individual
market segments.)
Johnsonville
Dino’s
Mr. Turkey
King Cotton
Guisseppe’s
Regional
Regional
Regional/Local
Regional/Local
Local
Insufficient data to completely answer
this question.
Number of buyers and
their relative size
(Address the number of
buyers in each market and
market segment. Buyer
size refers to the buyer’s
volume of sales for the
industry.)
*Households (72%) purchasing a
processed food product monthly. Please
writer in complete sentences.
*Sales at large grocery stores were
increasing due to the 50% market share
the covered.
*Restaurant clients steadily increasing
since 1990 (Annual meals eaten out
increased from 113 to 131 in 12 years)
Please qualify this statement.
*Specialty ethnic restaurant food eaters
on the rise, i.e. Italian, Cajun and French
Extent of rivals vertical
integration (How far
forward or backwards
have the rivals extended
their value chain?)
Low One-word answers are
unacceptable. Please write in complete
sentences. Furthermore, you are
supposed to provide facts in this column.
These comments apply to the
entire worksheet.
products in smaller quantities thereby
maintaining increasing local area sales.
Trying to compete on a national level
would have many entry barriers to
overcome due to the high volume of
competitors. Even though the number of
rivals is a threat, the fact that they tend to
focus their sales to specific items on a
national level is an opportunity for a
small manufacturer to create niche
markets on the local and regional level.
This is a good example of analysis
leading to the specific nature of the
opportunity.
This hold on the local retail market is
pushing out smaller specialty grocery
shops and narrowing the choices for
consumers. Customers are forced to shop
at the larger grocery chains where they
control the selections available for
purchase. This is an opportunity for
specialty product manufacturers.
Restaurants and institutions also control
which products are purchased and used.
The use of brokers and distributors is
necessary to infiltrate this market as well
the ability to sell a premium quality
specialty product at a less than premium
price to this specific group of buyers.
What is your point? Do these buyers
create an opportunity or threat for this
industry?
Specialty restaurants relative size varies
due on the menu and type of food being
served. The number of buyers is an
opportunity to the industry because of
the current growth of these buyers to the
market.
Rivals utilize broker and distribution
channels to move forward along the
value chain. There is potential threat
from meatpackers to enter the market,
but as of yet, that is not the case. Please
do not speculate on potential new
entrants. Stick with the criterion.
Therefore, the vertical integration of
rivals is almost non-existent. This could
be used as an opportunity for some
manufacturers to become more vertically
4
Extent of rivals
horizontal integration
Moderate
(Horizontal integration
applies to using the
synergies in your value
chain to produce different
products or provide
services for a different
industry or market
segment.)
*Financial
*Production
*Distribution
*Marketing
Types of distribution
channels rivals use to
access customers (Do
the channel types vary
by customer segment?)
Both independent and affiliated
distributors and brokerage houses.
Pace of technological
innovation in
production process
innovation
Pace of technological
innovation in product
introduction
Slow
Extent to which the
rivals products and/or
services are
differentiated
National competitors are perceived as
being differentiated through their
marketing and pricing strategies. True
differentiation is achieved through
specialty, flavor and low-fat branding.
Please elaborate on this response. State
the specific type and nature of the
differentiation.
Large national rivals have the ability to
utilize economies of scale throughout the
value chain thereby making it quite
difficult for smaller manufacturers of
Extent to which rivals
use economies of scale
in:
 Purchasing
Fast
integrated and create a cost advantage
over the market.
Smaller manufacturers may not have the
capacity to hire or manage marketing
dept. or to ally themselves with
distribution channel members. This is a
threat to smaller manufacturers in this
industry. You did not address the
question.
The ability to utilize the brokers
marketing resources as well as his
services for distributing product is very
beneficial. Using large distributors to
carry the product lines makes it readily
accessible to the leading grocery retailers
and restaurateurs. Not utilizing these
services is also a threat to the smaller
sausage manufacturer. You did not
address the question.
No serious changes within the industry at
this time. This could be a threat to the
industry overall where inefficient
practices become the norm.
The health trends of the public demand
changes quickly acted upon within the
industry. Studies have shown that lower
fat content products were swaying
consumers away from high fat content
sausage products. The ability to quickly
introduce a product that will meet these
lower fat needs will capture opportunity
and market share for whoever creates the
varieties first allowing 1st mover
advantage over rivals. While this is a
good response, it does not fully address
the criterion.
*Ability to better control price strategies
*Marketing concepts for coupons/special
promotions and advertising $’s to
promote brand loyalty
*Focus on fewer specialty items to
increase saving from economies of scale.
This is a threat to the smaller
manufacturer.
Please address the criterion. Focus on
the extent to which rivals actually use
economies of scale. I understand the
concept. There is no need for you to
5







Manufacturing
Services
Transportation
(logistics)
Marketing
Advertising
General and
Administration
Other steps in the
value chain (Refer to
chapter 4 for the
description of the
value chain.)
sausage products to gain any market
advantages except through specialization
and differentiation. Please focus on the
criterion. Economies of scale deal with
lowering the cost floor in each step of the
value chain. In which ways and to what
extent to rivals use economies of scale?
How does their use of economies of
scale create opportunities or threats for
the industry?
Extent to which the key
industry participants are
clustered in one
geographic location
Highly clustered (This is typical of
metropolitan areas) Major retail grocery
chains maintain control over 50% of the
market by supplying competing brands
shelf space within their establishments.
Extent to which certain
industry activities result
from learning and
experience curve effects
See my prior comments about one-word
answers to the question.
Moderate
R & D for flavors/recipes
Production processes
Distribution channel needs
Capacity surplus or
shortage in the industry
(Capacity refers to the total
manufacturing output
capability for the industry.
Capacity surplus would
Capacity shortage is creating the current
growth cycle for the industry.
repeat it application in each step of the
value chain.
*Ability to use bargaining power with
suppliers to gain advantage over bulk
purchase pricing.
*Ability to decrease manufacturing costs
due to the larger production outputs size
demands.
*Ability to have large marketing
concepts which utilize specials &
advertising
*Ability to use the services offered by
distributors to gain access to large
grocery chains or food-service
operations.
*Ability to cut transportation charges by
combining and planning shipment routes;
delivering more products at a time
cutting out unnecessary or un-timely
shipments. This is also a threat to the
smaller manufacturer within the industry.
In order to compete with the National
competitors, the use of retail grocer
distributors is necessary. You will have
to convince me of this situation. As
written I do not agree with this sentence.
This is a threat to the industry overall
because of high competition within a
small geographic area.
Activities done during the production
process are most likely to be effected by
learning and experience curve effects.
This sentence is too vague. Although,
small manufacturers can gain some
benefit over time, never as great a benefit
as the large competitors within the
industry. Research & Development is
specialized within the framework of
culinary and nutritional knowledge.
How do learning curve and experience
effects impact opportunities or threats for
this industry? For example, if there are
minimal learning curve and experience
effects, would it be easy for a new
company to enter this industry?
The immediate increase in the market
growth as well as the likely future
continued growth pattern creates
potential for capacity shortage within the
industry. Even though larger
manufacturers have the ability to fulfill
6
indicate that the industry
has the capability to
produce more products
than the market demands.)
Capital requirements and
the ease of entry or exit
Ease of entry is moderate.
Capital requirements are minimal to
moderate.
Industry profitability
High profitability within the Specialty
Sausage Market.
Degree of alliances
Low
large orders over greater geographical
areas, a shortage within the industry
would create opportunity for smaller
manufacturers, specialty niche
manufacturers or new start up companies
trying to enter the market. This is
currently an opportunity for the industry.
When growth maturity levels peak the
opportunity becomes a threat.
Government regulations pose a moderate
obstacle; the barriers instituted by the
FDA are geared towards regulation of
the food industry as well as USDA
regulations. The two largest obstacles are
the national competitors ability to control
the market and the difficulty entering the
distribution channels, which are
necessary to compete within the industry.
These facts are in the wrong column and
do not apply to the criterion. Capital
requirements are moderate. This is a
repeated fact. This ease of entry is a
threat to the market. Focus on the
industry.
Manufacturers of high quality specialty
items are able to capture premium profits
initially. If this is a fact, why is Giuseppe
losing money? That ability to continue
realizing these premium profits drops off
as competitive copying of specific items
takes effect. The ability to capture
premium profits is an opportunity to the
industry.
There does not seem to be any alliances
within the manufacturing of sausage
industry, although there is a moderate
trend toward alliances within the
distribution chain. Distributors ally
themselves with certain retail and
industrial markets, which ensure specific
product distribution to those retailers.
Although there is an alliance of sorts
which poses a threat to the industry, that
of the grouping of major grocery outlet
to capture and retain 50% of the
controlled shelf space within these
stores.
2. What is competition like and how strong are each of the competitive forces (page 79)?
7
Criteria
RIVALRY (pages 8184)
How many competitors
are there in this
industry?
Facts
What does this mean?
(Does this make the force strong or weak
for the industry? What does it mean for
the company?)
There are 9 major competitors with ~30
various product lines in Memphis region.
This large number of competitors creates
a strong rivalry within the industry.
Please state the specific nature of the
threat or opportunity.
This is a strong industry force and is an
opportunity for the individual company
to compete in a range of geographical
scopes, whether small or large. This
provides greater rivalry among
companies with competition crossing
over between all three distinct market
sizes. You did not address the criterion.
How does the relative size of each
competitor impact rivalry in this
industry? What threats or opportunities
arise from the relative size analysis?
Can not assess the strength or impact on
rivalry, due to lack of information.
What is the relative size
Competitors range in size from national
of each competitor?
(Bryan, Jimmy Dean, Healthy Choice
to context
regionalofand local
Please address rivalry inand
theJohnsonville)
industry in the
playersopportunities
(Dino’s, King
John
how rivalry creates or drives
or Cotton,
threats in
Morrell,
and
Mr.
Turkey).
the industry. Please focus on the industry and not a
single company. Please re-read the general instructions
at the top of the worksheet. This comment applies to
the entire rivalry section.
What is the industry
concentration ratio (C4)?
 Top 4 company’s sales
Industry sales
What is the product or
service demand growth
rate?
Are rivals using price
cuts or other competitive
weapons to boost unit
volume?
Are the customer's
switching costs low?
Are rivals launching
moves to change their
The case lacked the required sales
information to determine the industry
concentration ratio. ( sales for Top 4
firms divided by Total Ind. Sales)
The industry has grown as a whole at a
rate of 18.3% from 1996 to 1997.
Yes, competition is centered on price,
also included are special promotions,
advertising, and the variety of product
offerings. Shelf space, competitive
interbrand pricing, marketing campaign,
and use of the broker/distributor channel
are also key.
Yes, non-traditional outlets such as
Super Kmart, Super Wal-Mart and Sam’s
Club offer lower prices with bulk
purchasing making it difficult for profit
with small sausage producers. These
non-traditional outlets allow can easily
switch to another product if they don’t
like the price, causing the sausage
industry to switch costs lower to
compete.
Yes, large companies had the ability to
wage significant marketing campaigns,
This is a strong industry force and an
opportunity for the individual company.
With an increased growth rate, there is
more opportunity for sales volume and
potential profit making.
Weak industry force and poses a threat to
the industry.
This is a strong industry force and a
threat to individual companies. This also
means that companies have to use
marketing tactics such as other
promotions, focus on product
differentiation, cost, and specials to
promote their products. OK, but you
need to address the criterion.
This strong industry force and is a threat
to the individual company. This also
8
market share or industry
position at the expense
of other industry
participants?
What are the payoffs for
strategic moves?
which creates a major barrier for smaller
companies. Another major move is the
purchasing of shelf space from retailers.
Does it cost more to exit
the industry than to
continue participation?
Yes.
How consistent are rivals
strategic visions,
strategic intents,
objectives, strategies,
resources and origins?
(??) Two answers: (1.) Rivals strategic
visions and intents, objectives, strategies,
resources, and origins are very
consistent. Large regional and national
companies tend to concentrate on fewer
varieties and a larger volume of sales per
variety, while smaller companies offer a
wider variety of specialty sausages in
smaller volumes. Large companies have
much larger production volume and
marketing campaigns. Smaller
companies lack these traits. Also,
specialty sausage makers maintain their
sales volume in their regions and large,
national competitors are able to generate
sales over a wider geographical area. (2.)
Overall the industry shows
inconsistencies.
No
Are strong new entrants
acquiring weaker rivals
and launching wellfunded, aggressive
moves?
Payoffs include increased market share,
increased sales, possible higher profit
margins, and overall company success.
THREAT OF ENTRY
(pages 84-87)
Under the heading of new entrants, your
analysis should lead you to conclude that
new entrants are likely or unlikely to
challenge the existing firms in the industry.
Therefore, new entrants are likely (threat) or
unlikely (opportunity) to pose an opportunity
or threat to the existing firms in the
industry.
What economies of scale
Large national companies have the
means that there is heavy competition
revolving around the retail segment of
the market. What is the specific threat or
opportunity?
This means that focusing on marketing
and strategic moves plays an influencal
role in a company’s success. This is
strong industry force and provide and
opportunity for the individual company.
The industry is growing at a rate greater
than 18% in the last year. This means
that exiting the industry would cost more
because the company would be losing
it’s potential for a piece of that growing
market. This is strong industry force and
an opportunity for the individual
company. This response does not
address the criterion.
Overall this is a weak industry force and
a threat to the individual company.
Could be seen as being good in that
consistency helps companies
formulate strategies based on
which segment they fall into
(local, regional, or national).
Could be a disadvantage because
inconsistency provides no
foundation to build strategies
from.
If the rival’s vision etc. are consistent
would it increase or decrease rivalry? If
it increases rivalry you have a threat. If
it decreases rivalry you have an
opportunity. Your response does not
address the intent of the question.
This is a strong industry force and is an
opportunity for the individual company.
This is a strong industry force and a
9
exist in each of the
following areas:
 Production
 Purchasing
 Inbound and
outbound logistics
 Advertising
 Financing
 Customer service
 Raw materials
 R&D
 Other steps in the
value chain?
(Please note that
synergies across the
value chains of related
diversified corporations
also constitute
economies of scale.)
Cost and resource
disadvantages
independent of size
What are the learning
curve and experience
effects to enter?
Inability to match the
technology and
specialized know-how of
firms already in the
industry. How
accessible is the
industry's technology?
Brand preferences and
customer loyalty
ability to utilize economies of scale
throughout the value chain making it
difficult for both small and new
companies to gain any market
advantages. This favors large companies
and creates difficulty for new entrants.
threat to the individual company
(especially a new entrant).
This is a huge threat of entry for entering
companies in all of the value chain links.
Please re-read the instructions for this
section. See the yellow highlights. The
only exception might be customer
service. In this activity, economies of
scale may not affect the small or new
entrant. Customer service costs would
not decrease with volume and or size. (?)
Disadvantages include:
- Competitors are at the mercy of the
market
- Costs of raw materials (without vertical
integration)
- Having to use retailers’ distributors, not
the company’s own
Effects include; problems developing
and establishing new accounts, lack of
consistency in sales volume, inability to
develop long-term relations with major
customers, financial instability,
establishing broker/distributor relations,
and utilizing production capacity.
Those entering on a small scale can
easily match engineering used by small
firms in the specialty sausage industry.
Equipment utilized in the production
level is available, affordable, easy to
operate and maintainable. The steps
taken to produce the sausages can be
learnt easily for they are simple.
This is a weak industry force, but is a
threat to the individual company.
Brand preferences and customer loyalty
is low especially in the food service
segment. Retail customers are easily
swayed by low prices, product offering
and special promotions
This is a strong industry force and a
threat to the individual company.
Without experience and prior
knowledge, these effects could be
difficult obstacles for an entering
company.
This is a threat to the industry because
any one seeking to enter can easily
acquire the technology and proceed to
better it overtaking incumbent producers.
New entrants have the potential to copy
and improve specialized know-how that
could enable them to gain a competitive
edge and thus be successful. Overall,
this is not a strong barrier for entry
Loyalty is based on price and other great
deals thus brand preference and loyalty
are not big entry barriers. This creates an
opportunity for entrants who plan to keep
their costs low hence sell sausages at a
low price to retailers and the food service
industry. Please re-read the instructions
for this section.
10
Loyalty is based on price and
reputation….This is a threat to the industry
What are the capital
requirements to enter?
What other resource
requirements are
necessary to enter?
Capital requirements to enter the sausage
specialty industry are low. Some entrants
begin from their kitchens and grow to
become licensed sausage producers.
Then, capital is required to lease or
purchase equipment and a place to
continue production. Capital ranges from
$100 to $200,000 depending on scale of
entry.
Equipment: Sausage processor, freezer,
food mixer, etc
Raw material, recipe, utilities, human
labor, skills and knowledge.
Since capital required to make sausages
is low, any determined person could join
the specialty industry on a small scale.
Low capital requirement is a weak
barrier for entry which creates an
opportunity for entrepreneurs. Amount
required is easy to get.
This is threat to the industry
Resource requirements are basic. The
equipment is easy to get and affordable.
Some (skills and knowledge) are learned
and developed naturally. This creates an
opportunity for the entrant.
This is threat to the industry
What is the access to
distribution channels?
What regulatory policies
apply?
There is an established distribution
system in place. The easiest but the least
used is mail order. Commonly preferred
and used by large companies and
retailers is broker to distributor to retailer
or food service. In Memphis alone there
are approximately 6 brokers, 3 company
distributors to their store and at least 2
distributors to the food service industry.
Small firms attempt to bypass the
distribution chain. They distribute
directly to retailers and food service
markets, which is difficult.
FDA-Nutritional facts to appear on food
labels
USDA-Ensure that the raw material
used, the facility and equipment adhere
to set standards
Health department (OSHA)- Emphasize
on hygiene and safety.
What tariffs and trade
restrictions apply?
N/A
SUBSTITUTES (pages
87-88)
Under the heading of substitutes, your
analysis should lead you to conclude that
substitutes are likely or unlikely to challenge
the existing products the industry produces.
Therefore, substitutes are likely (threat) or
unlikely (opportunity) to pose an opportunity
or threat to the existing firms in the
industry.
What is the availability
High. Anything that can be consumed as
Access to commonly used distribution
channel is hard for new entrants. To be
accepted by brokers and distributors, the
entrant may be pressurized to offer better
margins than others and incentives. This
may strain their profits especially if it
goes on for a long time. Access to
distribution channels in the sausage
industry is a strong entry barrier.
Making it an opportunity for the industry
Please write in complete sentences.
The sausage specialty industry is heavily
regulated by several government
agencies. Costs to implement and
maintain the requirements are high.
Routine inspections may result to hefty
fines due to a small mistake.
Government regulations and policies are
strong entry barriers. Entrants see this as
a threat.
N/A
Sausage substitutes are a threat to the
11
of attractively priced
substitutes?
a snack, for breakfast, lunch or dinner is
a substitute for sausage. Cereal,
(processed meat) cold cuts, unprocessed
meat and poultry, vegetables, fruits etc
are just a few punctuation
Is the substitute of better, Subjective based on the personal
worse, or equal quality?
preference of the buyer (insufficient data
Is the substitute of better, to more narrowly define). Normally,
worse or equal
food is consumed when people feel
performance?
hungry. Sausages as well as the many
substitutes available are all satisfactory.
Is the substitute of better, Subjective based on the personal
worse or equal
preference of the buyer (insufficient data
nutritional value?
to more narrowly define). Sausages are
the least nutritious when compared to
whole meats and vegetables. They
contain high amounts of sodium and fat,
which may cause serious health issues
when consumed excessively.
industry. Many customers consider price
while shopping. If dinner sausages
happen to cost more than regular beef,
the buyer will pay for beef.
Is the substitute of better, Subjective based on the personal
worse or equal taste?
preference of the buyer (insufficient data
to more narrowly define). Too much
sodium in the sausages alters taste.
Can buyers easily switch Yes. There is no cost for consumers to
to the substitutes?
switch from sausages to substitutes.
Substitutes are readily available.
SUPPLIERS (pages 8890)
Is the item or service a
Meat, the primary ingredient in sausages,
commodity available on is a commodity and readily available
the open market from
from a large number of suppliers.
many suppliers who are
capable of filling the
order?
Are there good
There are a variety of meats available,
substitutes for the
providing acceptable substitutes for a
product or service to
particular meat product. However, there
which the buyers can
are no good substitutes available for
easily switch?
meat in general.
Is the company a major
Neither Guisseppe’s nor the sausage
buyer?
industry in general is a major buyer of
meat. The sausage industry accounts for
less than 1% of total meat product
consumed in the US. (0.8% = 462 mil
lb. / 260 Mil persons * 208.8 lb./person)
Does the supplier
No, there are many suppliers in the
dominate the industry?
Memphis area.
(The supplier provides
the industry with an item
Consumers are already aware that
excessive salt is unbearable. This is a
threat to the sausage industry. Address
the criterion.
This is a very strong threat to the
industry.
This is a threat to the industry because
substitutes are readily available to
consumers. Address the criterion.
This is a threat to the industry because
substitutes are readily available to
consumers Address the criterion.
The commodity status of meat results in
an opportunity for the industry to
maintain low cost and high availability
of supplies.
Availability of substitutes is an
opportunity to the industry, while lack of
substitutes is a threat.
No major influence on their suppliers, so
this could be a threat to industry. Not a
strong force, since meat is a commodity
and readily available from many
suppliers.
An abundance of suppliers results in an
opportunity for the industry to maintain
low cost and high availability of
supplies.
12
that accounts for a
sizable fraction of the
costs of an industry's
product (or service), is
crucial to the industry, or
significantly affects
product quality.)
Does an outside supplier
provide a cost advantage
over vertical integration?
The only value vertical integration would
add to the industry is material cost
reductions or improved material quality.
Since meat is a commodity, both quality
and prices are stabilized.
Does an outside supplier
provide other advantages
over vertical integration?
The major suppliers for sausages are all
commodities, so there is no significant
value added or cost savings in vertical
integration.
What types of working
relationships exist? Start
by listing the types of
working relationships
that exist. Then, focus
on the strategic
importance of
relationships with
suppliers in this industry.
Are these relationships
of strategic value for the
competitors in the
industry? If so, why and
how do the relationships
impact the competitive
structure and
environment of the
industry?
What is the relative
quality of the supplier
and his services or
products?
BUYERS (pages 90-92)
What is the cost of
switching?
Supplies need to make sausages:
How many buyers are
there in this industry?
Meat (primary ingredient)– commodity
(pure exchange)
Spices – commodity (pure exchange)
Casings – insufficient data
While individual firms may use vertical
integration to improve image, there are
more effective (and less costly) means
available to the specialty sausage
industry for image enhancement. This
does not address cost advantage relative
to vertical integration. Not a significant
threat to the industry.
Due to the availability of suppliers, there
is flexibility to institute just-in-time
supplies for production, reducing costs of
inventory. What is the opportunity or
threat that arises from your analysis of
this criterion?
The suppliers has little or no bargaining
power in these relationships, resulting in
an opportunity for the industry to
maintain low cost and high availability
of supplies.
Meat is a commodity, so no significant
effect. Any desired quality can be
obtained from a variety of suppliers.
This is an opportunity to the industry.
There is little or no perceived cost to
buyers for switching. There are a variety
of competitors and substitutes
The ‘eating’ public in the Memphis
region (large number of small quantity
buyers) See my prior comments about
This is a threat to the industry because it
creates more competition among rivals
(strong competitive force).
This is not a threat to the industry. A
small # of buyers would mean that
possibly an individual buyer could exert
13
What is the relative size
of each buyer?
What is the buyer's
knowledge level?
Can the buyers threaten
the industry with
backward integration?
Are the industry's
products discretionary
purchases?
writing in complete sentences. In
addition, please elaborate on the different
types of buyers.
Individuals are buying for personal
consumption, so only a small volume per
buyer. Grocery/retail outlets,
particularly larger chains, wield
significant bargaining power with
sausage manufacturers. Please elaborate
on the relative size for different types of
buyers. The current response does not
incorporate all of the buyers.
High, as they specialize as the
manufacturer’s primary marketing/sales
force. They were familiar with their
entire product line punctuation
The cost and effort required for
individual buyers to backward integrate
are prohibitive. Larger retail grocery
outlets within the Memphis region have
the ability to backward integrate into the
sausage-making industry.
Yes. Buyers can hold off on purchases
at their own discretion. Customers can
put off on purchases until their ready.
(i.e.) after prices decrees or substitute for
another meat product. Please write in
coherent, whole sentences.
competitive force to lower prices.
Retail & grocery outlets poses a threat to
the industry due to their superior
bargaining position.
Label product to express the above
USDA recommendation of sausage
prepared consumer consumption. I have
no idea of the thought you are trying to
convey with this phrase. Please state the
specific nature of the threat or
opportunity.
Large ‘chain’ grocery outlets pose a
threat to the sausage industry by threat of
entry and tying up current distribution
channels available to the industry. This
response does not address the criterion.
Aware of shifts in consumer product
judgment. The company should market
product attributes verses those of their
competitors to customers in an effort to
maintain brand loyalty and continued
purchases. While this recommendation
may be applicable, it is speculative in
nature, does not address the criterion,
and does not state the specific nature of
the opportunity or threat.
14
3. What is (and how are they) causing the industry's competitive structure and business environment to change (page 93)?
Please refer to the Cannondale1 example on the web site for good examples of appropriate analysis for this question.
Factors
Industry competitive structure
Industry business environment
Strategic implications
(pages 94-100)
This factor is supposed to capture how
This factor is supposed to capture how
the drivers of change are altering the
the drivers of change are altering the
industry's competitive structure.
industry's business environment.
Internet and new ecommerce opportunities
The competitive structure of an
industry entails the number of
competitors and their competitive
relationships. For example, an industry
entering maturity causes fewer, larger
competitors. This affects the industry's
structural arrangement between rivals,
buyers and suppliers. When
approaching maturity or when in
decline, the industry's business
environment will create intense rivalry
for a diminishing market.
The internet radically changes the
industry’s competitive structure by
expanding exposure to the number of
available buyers.
Please remember the discussion we had
in class about structure. Structure deals
with the organizations that comprise the
industry (rivals, suppliers and buyers)
and the relationships. Your task in this
question is to state how the criterion is
either creating new entities or changing
the relationships between the existing
entities. Please try this question again.
This comment applies to the
entire question.
The internet provides buyers access to
increased information regarding
products and firms. This increased
knowledge increases the buyers
bargaining position.
The internet poses a strong
threat of cross-market
competition and of increasing
the buyers bargaining
position.
Environment deals with creating
opportunities and threats for the
industry. In which ways do each of the
criterion impact the industry’s
competitive environment? Please try
this question again. This comment
applies to the entire question.
15
Increasing globalization of
the industry
Long term industry
growth rate
The US specialty sausage
industry experienced
significant growth in the
latter 1990’s. From 1996,
the industry grew 18.3%.
Who buys the product and
how do they use it
The primary buyers are
the general (sausageeating) public, retailers
(supermarkets, butcher
shops, etc.) and the food
service industry
(restaurants, hospitals,
etc.) in the Memphis
region and the
casinos/hotels in the
adjacent Tunica area.
Product innovation
This is not a major factor in the
industry’s competitive structure. There
are no major players on a global scale
at this time. However, there are 3
national competitors and numerous
local/regional competitors
The impact on the industry’s
competitive structure is the increase of
rivals due to new entrants into the
industry.
This is not a major factor. Currently,
there are 3 national competitors out of
25-30 in the Memphis area.
Not a major factor in the
industry.
More demand for product (based on
growth) creates the threat of new
entrants into the industry.
Large long term growth
creates a threat of new
entrants, particularly with the
low entry barriers in the
specialty sausage industry.
The public’s perception of the specialty
sausage is shifting from primarily a
breakfast food to a foodstuff for all
meals. In response to this trend, the
food service industry is becoming a
more significant player in the
competitive structure, driving the
industry in two distinct areas:
 High-quality/taste ‘branded’
specialty sausage in the
restaurant/casino/hotel segment
 Low-cost, average quality/taste
specialty sausage in the ‘institution’
market segment (hospitals, nursing
homes, etc.)
The public’s perception of the specialty
sausage is shifting from primarily a
breakfast food to a foodstuff for all
meals. This fundamental change in the
business environment creates the
opportunity of new market segments
for the industry.
The changes in the use of
specialty sausages provide the
opportunity to open new
market segments for the
industry.
The food service industry’s
drive to rapidly adapt to this
changing trend threatens the
specialty sausage industry by
applying immediate
competitive pressure to adapt
product lines & marketing
strategies to meet the growth
in demand or lose market
share to substitutes.
New product can be rapidly replicated
by competitors, minimizing any impact
on industry’s competitive structure.
This is a major factor to the industry’s
business environment. Growing
interest in ethnic foods is inspiring a
variety of new specialty sausages
flavors among rivals. The effect here is
to differentiate products along ethnic
themes.
This is a strong threat,
requiring product
differentiation to
attract/maintain customers,
driving up product
development & marketing
costs.
16
Technological change
Refer to product innovations and the
internet sections of question 3, as these
are the major technological factors for
this industry.
Refer to product innovations and the
internet sections of question 3, as these
are the major technological factors for
this industry.
Marketing innovation
Distributors use marketing tools to
study and collect information on the
end user. Manufacturers can run large
retail (or wholesale) promotions to
increase demand for their products.
Retailers control shelf space, thereby
controlling demand. They obtain their
specialty sausages primarily through
distributors. Success here is dependent
upon having a distributor carry your
product.
The food service industry controls
menus and ingredients, thereby
controlling demand. Restaurants may
be willing to pay premium prices for a
high-quality product, but institutions
are more focused on average quality &
below-average cost.
Entry of major firms
No major firms entering the industry at No major firms entering the industry at This is an opportunity; as no
this time. Therefore, no major effect on this time. Therefore, no major effect on additional strategies will need
the industry’s competitive structure.
the business’s competitive structure.
to be formulated to protect
against additional large
entrants.
No major firms leaving the industry at
No major firms entering the industry at This is not an immediate
this time. Given the growth and
this time. Therefore, no major effect on threat, though prolonged
acceptable profitability currently in the the business’s competitive structure.
industry growth will
industry, this is not a likely event.
Based on the industry’s growth rate,
necessitate the need for
this may change.
strategic planning to dealing
with the entry of major firms
in the future.
Exit of major firms
Refer to product innovations
and the internet sections of
question 3, as these are the
major technological factors
for this industry.
This is a threat, as distributors
wield significant influence in
this arena. Creating
distribution agreements with
distributors may reduce
prices, forcing either reduced
profits or cost reduction
strategies.
17
Diffusion of technical
know-how
Cost and efficiency
Growing buyer
preferences for
differentiated products
instead of a commodity
product
This is not a major factor of change at
this time. Technological know-how is
thoroughly diffused throughout the
industry. Since the know-how is out
there, this is not a barrier to entry into
the industry
The specialty sausage industry focuses
on a differentiated product, and
therefore does not focus on low cost.
Also, due to the commodity nature of
the supplies need to make specialty
sausage, costs of supplies are fairly
stable. Cost & efficiency do not
significantly effect the industry’s
competitive structure.
This is a major factor in the industry
competitive structure. Nationally, there
is a growing interest in ethnic specialty
foods, changing the demographics (and
size) of the specialty sausage buying
public.
Since the know-how is out there, this is
not a barrier to entry into the industry
This poses a threat of new
entrants, since anyone could
obtain the necessary knowhow to enter the industry
The specialty sausage industry focuses
on a differentiated product, and
therefore does not focus on low cost.
Also, due to the commodity nature of
the supplies need to make specialty
sausage, costs of supplies are fairly
stable. Cost & efficiency do not
significantly effect the business
environment.
Nationally, there is a growing interest
in ethnic specialty foods. The popular
flavors and their growth rates are
shown below:
Flavor
Market %
%
Growth
Smoked
45.7%
15.6%
Polish
21.3%
24%
Italian
4.3%
31.2%
Hot flavor
7.7%
No
info
This is not a major threat to
the industry.
The interest in ethnic foods
provides an opportunity to
open new market segments
for the industry.
The two primary threats
associated with this
opportunity are possible new
entrants attracted to these new
market segments and
competitive pressures to
adapt product lines &
marketing strategies to met
the changing customer
preferences. Additional
product development &
marketing costs are incurred
as a result. The effect is that
companies must target these
growing interests to
maintain/grow their customer
base.
18
Regulatory and
government policy
changes
This is a minor factor in the industry’s
competitive structure. Some barriers
present for new competitors to meet
government regulations, but not
significant (as evidenced by
Guisseppe’s entry into the industry).
New companies could enter the market
in a relatively short period of time.
There is increased regulatory pressure
for accurate labeling of products.
Societal concerns,
attitudes and lifestyle
changes
Generally people are focused on eating
healthier foods. Typical specialty
sausages have a high fat content. In
response to this changing trend, the
industry is using lower fat alternatives
to the traditional sausage ingredients,
introducing a new set of suppliers
(chicken, turkey, etc.) to the
competitive structure. These common
substitutes for pork & beef are
commodities, increasing the overall #
of suppliers available to the industry.
1998 survey showed the average time
for meal prep was decreasing. 70% of
households spend no more than 45
minutes in preparing a meal. There
was insufficient information available
in the case to determine how specialty
sausages rate with respect to
preparation time. In general, lower
preparation times create greater
perceived customer value, so this poses
a threat to the industry of substitutes
that better meet this developing
customer need.
Current regulatory and
government policy present
two minor threats to the
industry:
1) new companies could enter
the market in a relatively
short period of time and 2)
labeling, combined with
consumer preferences for
lower fat products, would
highlight the high fat content
of most specialty sausage.
The increase in overall
available suppliers is an
opportunity to the industry’s
competitive structure,
keeping costs of supplies
relatively stable. The
increased importance of
shorter preparation times
among consumers creates
threats within the industry’s
business environment.
19
Reductions in uncertainty
and risk
Supply channels are plentiful and
numerous, so costs for raw materials
are kept low/stable by competitive
forces.
Distribution channels for retail
customers are becoming more
centralized, reducing the overall # of
buyers and therefore changing the
industry’s competitive structure.
Increased bargaining power on the part
of the buyers due to centralization
threatens the industry.
Centralization of distribution
is a threat, as centralization of
distribution for the retail
market applies competitive
pressure to keep prices low.
Availability of suppliers is an
opportunity, as the
competitive pressures are on
suppliers to keep costs of raw
materials relatively stable.
There is an opportunity to
further reduce costs by
forming strategic alliances
with certain suppliers, hence
driving down costs further.
20
4. Which companies are in the strongest/weakest positions (page100)?
Prices
Companies in price rage
High
Johnsville, Bryan, Giuseppe’s (high price products)
Medium
Jimmy Dean, Mr Turkey, Healthy Choice,
Giuseppe’s (medium price products)
Low
King Cotton, Bryan, John Morrell (low prices products)
narrow
broad
Market scope
Based on the graph, Bryan and Giuseppe’s are in better position than others due to the price range they are covering. Bryan sells
high and low price sausages, Giuseppe’s is covering medium and high, while others are concentrate in only one range of
prices.
21
Fat content
High
1,4,7
Medium
Low
Companies in market
1 Johnsville
2 King Cotton
3 Jimmy Dean
4 Bryan
5 John Morrell
6 Mr. Turkey
7 Healthy Choice
8 Giuseppe’s
2,3,4,8
6,7,8
Narrow
Broad
Market Scope
Based on the graph, stronger companies are those in medium fat content range. The products have a medium standard in terms of price and fat
content, what might attract most consumers. Those companies in high and low fat content are in the extreme positions and the prices are too high.
However, between these last two companies, the ones in low fat content are in a stronger position due to the fat content. Even though prices are
high, these companies are offering healthier products.
22
Insufficient
information
available in
the case.
Would require
visions &
mission
statements and
relative sales
for the
industry
Insufficient
information
available in
the case.
Would require
visions &
mission
statements and
relative sales
for the
industry
Best value
Differentiation
Low cost
Best value
Differentiation
Low cost
Differentiation
Differentiation
w/narrow
product line
What does this mean in terms of
their most likely moves?
Insufficient
information
available in
the case.
Would require
visions &
mission
statements and
relative sales
for the
industry
What is their competitive strategy
(low cost, differentiation, broad or
narrow, best value)?
What is their strategic posture
(offensive, defensive, both)?
Insufficient
information
available in
the case.
Would
require
visions &
mission
statements
and relative
sales for the
industry
What is their competitive position
(getting stronger, well entrenched,
stuck in the middle, going after
different market position, losing
ground, retrenching)?
National
Regional
Regional
National
National
Regional
Regional
National
What is their market share objective
(aggressive expansion, expansion
via internal growth, expand by
acquisition, hold present share, give
up share)?
What is their strategic intent
(dominant leader, overtake the
leader, top 5, move up a position,
maintain position, survive)?
Johnsonville
Dino’s
King Cotton
Jimmy Dean
Bryan
John Morrell
Mr. Turkey
Healthy
Choice
What is the competitive scope of
each (local, regional, national,
multi-country, or global)?
List the competitors
5. What strategic moves are rivals likely to make next (page103)?
Refer to Table 3.3 on page 105.
Insufficient
information in the
case. Would require
some information on
each company’s
business strategy.
23
6. What are the key factors for competitive success (in this industry) (page 106)?
How does each competitor fare on each success factor? To use this tool, start by determining which of the KSFs apply. Then provide your
justification for choosing these KSFs. Generally, there are less than ten (10) KSFs applicable to an industry. Then assess each of the industry
competitor's capabilities for the KSF. Please note I provide space for three competitors. You should add the number of columns necessary to
evaluate all of the competitors in an industry. You should also add industry specific KSFs when they apply. Refer to Table 3.4 on page 107.
Giusseppe’s
Manufacturing quality: Quality is
essential to people who buy specialty
products
Manufacturing flexibility: Specialty
sausage industry in Memphis caters to a
wide range of customers with different
tastes. Ability to change and adapt
production to satisfy them is a plus.
Distribution Network strength: - A
strong network of suppliers, -brokers and
distributors.
-In Memphis, meat products are normally
marketed and distributed to the retailer/end
user by a broker/ distributor. Producers
who utilize this channel gain access to
many customers.
Ample space on retailer's shelves:
-Supermarkets have many customers. A
conspicuous product is usually selected.
Also “Shelf space and …were keys to
success in this market”. P 4
What is their capability for this factor?
Superior. “Giusseppe’s prides itself in producing
high quality premium sausages. Their strategy
involves purchasing only top of the line
ingredients, requiring employees to take
precautions when producing the various types of
sausages and insisting that every aspect of
production process follow a specific set of
procedures.” Pg. 6
High. Giusseppe’s is a local, small producer. Its
size enables it to produce a wide variety of
specialty sausages in small volumes
Medium. Outbound Logistic - At the present time,
the majority of Guisseppe's sales did not originate
from using the broker/distributor channel” p.11
In bound Logistic- Suppliers are many and deliver
on a weekly basis.
Low. Giuseppe sells to at least 10 stores out of 71
in Memphis. Distributor/broker channels are not
fully established.
What does this mean?
Quality manufacturing is an important aspect for
Giuseppe. Its high end customers seek high quality
products.
In case of any changes in production e.g.
introduction of new types and variety, Giusseppe’s
has the capability to accommodate the change.
Therefore, Giusseppe’s is flexible enough to
produce a variety of products.
Guisseppe's is a small producer who is yet to form
relationships with dealers. By passing dealers
increases their profit margins by avoiding markups
and surcharges along the way. On the other hand,
Guisseppe’s potential to increase market share in
Memphis is dependent on achieving a strong
network.
“Giuseppe’s had significant sales potential in
major supermarket chains, particularly in the large
up scale markets located in the more affluent
geographic areas of Memphis. If Giueseppe
decided to market its sausages to these markets, it
would have to deal with their distributors”. P 10
24
Giusseppe’s
Speed of distribution: How fast the
supplies and end products get to their users
is important due to the nature of the
product involved- meat. This strength is
partly dependent on the networks
established.
Breadth of product line and selection: A
producer’s ability to have a broad product
line and selection is a factor to
differentiation.
What is their capability for this factor?
“ The meats used in the sausages were ordered
weekly…Both freezing and immediate shipment
ensured the freshness of the sausage.” p.7-9
What does this mean?
Giuseppee Original Sausage company knows the
importance of speedy distribution. Chances of
sausage contamination are low.
Excellent. “Giueseppe’s product line consisted of
more than 80 different sausage-related products”.
P7
They have the ability to attract, serve and satisfy
their target customers. This is the company’s
differentiation point.
Attractive styling/packaging: Final
presentation of a specialty product is
important to the buyers.
Quality control know-how: This is
important in the meat manufacturing
process. Products are thoroughly assessed
for freshness and distinctive taste.
Good Vacuum sealed packages for individual
customers; plastic wrapped and boxed for food
service customers
Excellent. “…Strategy involved purchasing top of
the line ingredients, requiring employees to take
extra precautions when producing the various
types of sausage and insisting that every aspect of
the production process follows a specific set of
procedures he had personally developed”. Pg.7
Giuseppe’s packs to suit consumer’s expectations
(nothing fancy). The vacuum sealing ensures
freshness
They have set quality control procedures that
contribute to exceptional production and customer
satisfaction.
Jimmy Dean
Manufacturing quality: Quality is
essential to people who buy specialty
products
What is their capability for this factor?
Average.
Jimmy Dean’s sausages are vacuum-sealed to
maintain freshness. On the other hand they do not
have instructions, sell by date on the package and
are high in fat; 15g.
Medium
Jimmy Dean is a national producer who
manufactures fewer varieties in large volume.
What does this mean?
Quality for the Jimmy Dean’s sausage is just right
for their low-end customers. They appeal more to
cost conscious consumers
Manufacturing flexibility: Specialty
sausage industry in Memphis caters to a
wide range of customers with different
tastes. Ability to change and adapt
production to satisfy them is a plus.
Large companies have the resources to be flexible
especially in increasing or decreasing capacity.
However due to their size and set procedures, they
tend to be less flexible when it comes to
introducing new sausage types.
25
Jimmy Dean
Distribution Network strength: - A
strong network of suppliers, -brokers and
distributors.
-In Memphis, meat products are normally
marketed and distributed to the retailer/end
user by a broker/ distributor. Producers
who utilize this channel gain access to
many customers.
Ample space on retailer's shelves:
-Supermarkets have many customers. A
conspicuous product is usually selected.
Also “Shelf space and …were keys to
success in this market”. P 4
Speed of distribution: How fast the
supplies and end products get to their users
is important due to the nature of the
product involved- meat. This strength is
partly dependent on the networks
established.
Breadth of product line and selection: A
producer’s ability to have a broad product
line and selection is a factor to
differentiation.
Attractive styling/packaging: Final
presentation of a specialty product is
important to the buyers.
Quality control know-how: This is
important in the meat manufacturing
process. Products are thoroughly assessed
for freshness and distinctive taste.
What is their capability for this factor?
Very good. Jimmy Dean is a large regional and
national company with a strong supplier and
distributor/net work.
What does this mean?
A strong network of both suppliers and
Distributors/brokers allows Jimmy Dean to
increase market share by reaching many
customers.
High. Jimmy Dean is a large producer who utilizes
the distribution channel to get their sausages out to
consumers. They therefore get ample shelf space
Using the distribution channel gets products ample
space on retailers’ shelves in Memphis. This will
helps increase their sales and market share.
High.
Established distribution channels assured fast
distribution.
Products are fresh. Chances of contamination are
low.
Poor.
One listed product
Jimmy Dean is a regional national company with
fewer varieties. This satisfies its customer base.
Good Vacuum sealing
Freshness of the product is ensured. Vacuumsealed products are attractive.
Bryan
Manufacturing quality: Quality is
essential to people who buy specialty
products
What is their capability for this factor?
Average.
Similar to Jimmy Dean; They are vacuum-sealed.
They are high in fat – between 16g and 22g, no
sell by date and instructions on package.
What does this mean?
Bryan is national producer who caters to a low end
and Broad market.
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Bryan
Manufacturing flexibility: Specialty
sausage industry in Memphis caters to a
wide range of customers with different
tastes. Ability to change and adapt
production to satisfy them is a plus.
Distribution Network strength: - A
strong network of suppliers, -brokers and
distributors.
-In Memphis, meat products are normally
marketed and distributed to the retailer/end
user by a broker/ distributor. Producers
who utilize this channel gain access to
many customers.
Ample space on retailer's shelves:
-Supermarkets have many customers. A
conspicuous product is usually selected.
Also “Shelf space and …were keys to
success in this market”. P 4
Speed of distribution: How fast the
supplies and end products get to their users
is important due to the nature of the
product involved- meat. This strength is
partly dependent on the networks
established.
Breadth of product line and selection: A
producer’s ability to have a broad product
line and selection is a factor to
differentiation.
What is their capability for this factor?
Same as Jimmy Dean
What does this mean?
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Good
5 listed products
Same as Jimmy Dean
Attractive styling/packaging: Final
presentation of a specialty product is
important to the buyers.
Quality control know-how: This is
important in the meat manufacturing
process. Products are thoroughly assessed
for freshness and distinctive taste.
Good Vacuum sealing
Freshness of the product is ensured. Vacuumsealed products are attractive.
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Johnsonville
Manufacturing quality: Quality is
essential to people who buy specialty
products
Manufacturing flexibility: Specialty
sausage industry in Memphis caters to a
wide range of customers with different
tastes. Ability to change and adapt
production to satisfy them is a plus.
Distribution Network strength: - A
strong network of suppliers, -brokers and
distributors.
-In Memphis, meat products are normally
marketed and distributed to the retailer/end
user by a broker/ distributor. Producers
who utilize this channel gain access to
many customers.
Ample space on retailer's shelves:
-Supermarkets have many customers. A
conspicuous product is usually selected.
Also “Shelf space and …were keys to
success in this market”. P 4
Speed of distribution: How fast the
supplies and end products get to their users
is important due to the nature of the
product involved- meat. This strength is
partly dependent on the networks
established.
Breadth of product line and selection: A
producer’s ability to have a broad product
line and selection is a factor to
differentiation.
Attractive styling/packaging: Final
presentation of a specialty product is
important to the buyers.
What is their capability for this factor?
Average.
Johnsonville produces sausages that are high in fat
–25g. They are packaged in trays which have
instructions and no sell by date
Same as Jimmy Dean
What does this mean?
They seem to focus on buyers who value taste thus
produce sausages that contain a lot of fat. E.g.
restaurants.
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Same as Jimmy Dean
Good
3 listed products
Same as Jimmy Dean
Good
Tray
Products packed in trays are easier to open than
vacuum- sealed. They are also attractive.
Same as Jimmy Dean
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Johnsonville
Quality control know-how: This is
important in the meat manufacturing
process. Products are thoroughly assessed
for freshness and distinctive taste.
What is their capability for this factor?
What does this mean?
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7. Is this industry attractive and what are its prospects for above-average profitability (page 108)?
Criteria
Industry growth potential
Facts
Good. Based on the increased sales it is a
growing industry.
Does competition permit adequate profit
potential?
Yes. Demand is high in this growing market.
Does competition lead to stronger or weaker
forces?
Strong force, primarily due to the high
availability of substitutes
Will the prevailing driving forces positively
or negatively impact profit potential?
Positively. Threats through product
innovations, life style changes.
Internet
Product innovation
Increased buyer preference for a differentiated
product.
Societal/lifestyle changes
Guisseppe’s potential is good competitively.
Our larger rivals focus on large volume sales
on a restricted product line rather than quality
and taste.
What is the company's relative competitive
potential in this industry?
What is the company's ability to capitalize
on its competitor's weaknesses?
Small production capacity with flexibility to
change production schedules to changing
sales.
What does it mean?
Strong growth allows increase in customer
base, creation of specialty niche markets, and
eventual expansion of market share.
Demand exceeding supply creates the ability
to charge higher prices for product, allowing
for above-par profits.
Strong competition between existing rivals as
well as the threat of new entrants, high
presence of attractive substitutes, and
moderate buyer bargaining position creates a
strong competitive environment for the
industry. Do these factors make the industry
more or less attractive?
We will have to react to such driving forces,
as we are more flexible to changes. Do these
factors make the industry more or less
attractive?
Guisseppe’s focuses on a niche market with
small competitors who produce high quality
sausage products. The company exploits its
innovative quality products to the
general/affluent markets. Guisseppe’s has the
opportunity to increase sales volume by
selling a more differentiated product with a
higher price structure.
Giuseppe’s has the flexibility to adjust
product line to shifts in customer preferences
more quickly than its larger rivals. Do these
factors make the industry more or less
30
Criteria
Can the company defend against or is it
insulated from the factors that make this
industry unattractive?
How well does the company's capabilities
match the industry's KSFs?
What are the future uncertainties and risks
for this industry?
What is the severity of the issue(s) or
problem(s) facing this industry?
Facts
Here are the major unattractive elements of
the industry:
Substitutes are readily available & no cost of
switching
Threat of entry
Access to outbound distribution channels
Access to shelf space
The following KSFs do not match up well
Guisseppe’s capabilities:
Ample shelf space, due to the expensive
nature of procuring premium shelf space.
Distribution channels
The major uncertainties are threat of entry and
social concerns regarding health issues.
List issues & severity.
threat of entry due to growth in industry
moderate
social concerns regarding health issues
moderate & growing
substitutes
severe
What does it mean?
attractive?
The only defense against substitutes is
creating a perceived cost of switching among
customers. Guisseppe’s is focussing on
branding a highly differentiated, quality
product.
Threat of entry – This is an ongoing challenge
to all members of the industry.
Access to outbound distribution channels –
Guisseppe’s has failed to utilize the available
distribution channels (brokers & distributors)
Access to shelf space – due to the expensive
nature of this challenge, Guisseppe’s is not
capable of immediately addressing this
challenge.
Do these factors make the industry more or
less attractive?
Ineffective use of available distribution
channels. The costs involved with procuring
premium shelf space are prohibitive.
Do these factors make the industry more or
less attractive?
Significant threat of entry due to growth in the
industry. Societal changes force product
innovation upon the industry. Do these
factors make the industry more or less
attractive?
Need to take strategic actions to counter new
entrants into the industry from eroding current
market share.
Need to focus on new product lines to address
this growing need
Building brand loyalty and product
differentiation strategies to counter the impact
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Criteria
If a corporation, will continued participation
in this industry positively or negatively
impact its ability to compete in other
industries?
Facts
Guisseppe’s does not currently participate in
more than one industry.
What does it mean?
of substitutes. Do these factors make the
industry more or less attractive?
Not an immediate concern for Guisseppe’s.
Now go to the summary section of the case analysis outline and complete the summary of external factors matrix. You should be thinking in terms
of opportunities and threats the external environment presents to the industry company under analysis.
32