PORTERS FIVE FORCE MODEL

Threat of new entrants (MODERATE)

• Cost and Resource advantages:Amul dairy is co-operative society. That means “cooperation among
competition” is the fundamental principle. Amul dairy is managed under the norms of GCMMF and
market the products under the brand name ‘Amul’, which has a very good reputation at domestic and
international level. Here, the raw material procurement is very difficult for the new entrants.
Consequently Capital requirement is also high. Still new entrants are emerging such as domestic and
international players. So the threats of new entrants are moderate.

• Brand preferences and consumer loyalty: There is an immense level 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 to other 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 it would be a very difficult task. For GCMMF the result is years of hard
work and its investment in its employees as well as at different levels in the distribution network

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

• Capital requirements: The total investment required in the industry is huge and is a decision worth
considering even for MNC’s. The investment decisions cover the processing costs as well as the
marketing costs. To compete with the brand Amul in India is difficult as Amul is synonymous to
Quality.II. Bargaining power of supplierThe main objective of Amul dairy is not profiting but sustenance.
As it is a part of co-operative society, itruns for the benefit of farmers those are the suppliers of milk and
users of milk products. According theconcept of the cooperative society supplier has bargaining power
to have a good return on his or hersupply. However, supplier has limited rights to bargain with the
cooperative society because it is madeand run for the sake of mass and not for individual benefit. But it
is made sure that the supplier gets hisfair share of return.

Bargaining power to supplier(LIMITED)

There is appropriate bargaining power of the supplier. In olden days there were not any kind
ofcooperative societies as the farmer was exploited. But, nowadays the farmer’s rights are protected
underthe cooperative rules and regulations, which ultimately results in moderate power of bargaining
from thesupplier
Bargaining power of buyers (HIGH)
.

• Cost of switching to competitor brands: The switching of brands is seen very much in products such as
ice cream, curd, milk powders, milk additives etc. but it can be seen comparatively less in liquid milk
category. The other brands which provide the same products as Amul for ice cream are Vadilal, Quality
Walls etc. And the competitors for the milk markets are mainly local or regional marketers. For e.g.,
Nandini dairy in Karnataka is a competitor for Amul.

• Large number of buyers: Milk is a necessity product and hence is a mass product. It has a considerable
share of the rupee spent by any Indian. A study shows that in urban areas about 36% of monthly per
capita expenditure was on food items. Out of that, around 10% was spent on milk and milk products.
Moreover the buyers are spread evenly over the country and do not have any bargaining power. The
buyers we are referring to in this scenario are the common man or any individual who is health
conscious and considers milk as a substitute for daily nutrition value.

. Rivalry among competitors (HIGH)

• Demand for the product: The demand of the products of GCMMF is increasing at a very healthy rate.
AMUL’s sales of Rs 11,670 crore for the year ended March 2012, almost 55% more than Nestle Indias Rs
7,541-crore sales. Exactly a decade ago, the gap was much narrower when Amul reported sales of Rs
2,336.48 crore against Nestle Indias Rs 2,075 crore. To stand against the rivalry GCMMF is coming up
with a wide range of products like sugar-free chocolates, pro biotic curd and ice cream.

• Nature of competitors: In different business category GCMMF faces competition from different
players. Amul butter faces the least competition among its products in India. It holds an unchallenged
market share of 86%. The nearest competitor is Britannia. In the chocolate category it faces
competition from Cadbury and Nestle. Chocolate market is estimated to be around 1500 Cr., growing at
18-20% per annum. Cadbury is the market leader with 72% market share. Amul stands third, after
Nestle. In the ice cream market it faces competition from firms like Kwality, Vadilal and Mother Dairy.
While AMUL holds a market share of 38%, Kwality, Vadilal and Mother Dairy follows with respective
shares of 14%, 12% and 8%.

Moreover in almost all categories there is presence of local retailers and processors and milk vendors.
Rivalry intensifies as each of the competitors has different lines and this would in turn depend on the
importance the line holds for the competitor.

• Mergers and acquisitions: As such in the industry there are no mergers or acquisitions. However if any
MNC wishes to enter through this route then the competition might be severe.

Threat of substitutes (HIGH)

 Awareness is high: There is increasing awareness about the potential health concern around
consumption of certain dairy products, especially butter. The fact that Amul’s own low fat, cholesterol
butter variants have not been able to gain significant market share leaves the door open for other
companies to take advantage of this potential weakness. Also, margarine, cheese spread, and jams, are
being used instead of butter as table spreads and the options in the market are plenty.

• Availability of attractive priced substitutes: Different substitutes are available for different category of
products. There is ample availability of low priced substitutes from local vendors and retailers. This is a
front where GCMMF is still finding hard to combat.

• Satisfaction level of substitutes: Customers do consider these products 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 any hurdles.

• Not immediate substitutes: Distant substitutes are present in many of the categories of business of
GCMMF. For example in the Masti Buttermilk 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
getintense or loosen up depending upon the moves of its competitors, buyers, suppliers, etc.
HoweverGCMMF has been able to outperform on almost all fronts excluding a few lines of business.

PESTEL ANALYSIS

PESTEL Analysis is presented seeking to analyse the external marketing environment.

[1.] POLITICAL:
Some of the political factors which can affect the mission for Mother dairy are listed as
under:
1. Indian Government policy to encourage to Dairy sector.
Government has allowed 100% Foreign Direct Investment (FDI).
Implementation: State Schemes, Central Government Schemes, and by both
Centre and State shared Schemes.
2. Government’s assistance to strengthen and expand village infrastructure for better
milk procurement and providing producers opportunity to access markets directly.
[2.] ECONOMICAL:
Economic factors are metrics that measure the health of any economic region. Indian
economy is a growing economy which can facilitate Mother dairy.
1. Indian Economy GDP growth rate is approx. 7.6 to 7.9% currently.
2. Dairy Industry contribution of 22 per cent to agricultural GDP.
3. Population demographics with major proportion of middle class income and rapidly
growing disposable income.
4. Easily available loan options to start a Dairy business with “GRAMODHYOG VIBHAG”.
[3.] SOCIAL:
Social factors which focusses on demographics and preferences of consumers in the Dairy
market are vital external factors for Mother dairy to assess.
1.Various socioeconomic growth drivers will have a significant impact on the upcoming changes in the
overall dairy segment. Now traditional drivers of taste, price,and more are substituted by various dynamic
drivers such as health, and wellness, changes in consumer behavior, transparency,etc.
2. Milk and milk products as staple source of protein in diet both in urban as well as in
rural India which makes its consumption level high.
3. Because of the changes in the consumer lifestyle and orientation toward health
government has fixed many norms within that every dairy industry will have maintain
a certain standard of the milk product.
4. Dairy business set up has helped in overall improvement of rural economy of India.
[4.] TECHNOLOGICAL:
This entails on recognizing the potential technologies that are available and can be
harnessed for better growth of business.
1. Thrust is on research and development for better procurement and storage.
2. Recently every industry has started using RFID (Radio frequency identification)
technology to track movement of milk van.
3. Dairy product based company are also focusing on the adoption and implementation
of SAP and ERP across their organisation to achieve better supply chain
management.
[5.] LEGAL:
Legal framework which are to be considered. Dairy industries in India are controlled by The
Department of Animal Husbandry and Dairying (AH&D) -now named as Department of
Animal Husbandry Dairying & Fisheries (DADF) is one of the Departments in the Ministry of
Agriculture. The framework is composed of:
1. Legal framework and Regulations of State government
2. Legal framework and Regulations of central government
[6.] ENVIRONMENTAL:
1. Milk packaging non-disposability increases pollution level.
2. Waste Management is vital; Cattle waste material can be used as bio-fertilizer.
3. Dairy business may cause some health issues like. Asthma.