123 School Work

RTE case study

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       Taken that private labels and other companies are making some impact in the industry, is the RTE cereal industry attractive and it is a good industry for other to enter? Looking at the five analysis of the competitive forces model will help to determine if the cereal industry is attractive or unattractive one. Beginning with the first force, which is the threat of new entrants. Threat of new entrants relies on barriers such as capital cost, differentiation of product, and cost advantage of already existing firms. Several capital cost are cost of marketing, advertising, and research and development. For the cereal industry, "development of a new brand required 2-4 years and R&D expenditure of $5-$10 million" (Corts, 1995). The cost of marketing and adverting, such as media advertising and cost of making coupons, can total more than $1 trillion. Furthermore, there is not much to differentiate one's cereal product from the next to force a consumer to switch brand. In addition, the cost advantage of the Big Three and already established company are great, because they have close network with suppliers. As a result of high capital cost, difficult to differentiate the product, and the cost advantage of existing company, there RTE cereal industry has a low to moderate threat to entry...