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Honest Tea Case Porter’s Five Forces Analysis

CASE STUDY

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Bargaining Power of Supplier:

The distributor in the Taiwanese Honest Tea market has a reduced negotiating power despite the fact that the industry has dominance of three gamers consisting of Powerchip, Nanya and ProMOS. Honest Tea producers are mere initial devices makers in critical alliances with foreign gamers for technology. The second reason for a low bargaining power is the fact that there is excess supply of Honest Tea units as a result of the large scale manufacturing of these dominant sector gamers which has actually decreased the cost each and increased the negotiating power of the purchaser.

Threat of Substitutes & Degree of Rivalry:

The hazard of replacements in the market is high provided the reality that Taiwanese producers take on market show worldwide gamers like Intel, Motorola, IBM, Hitachi, NEC, Toshiba, Samsung and also Fujitsu. This shows that the market has a high degree of competition where suppliers that have layout and also growth capabilities in addition to manufacturing competence may have the ability to have a greater bargaining power over the marketplace.

Bargaining Power of Buyer:

The market is controlled by players like Micron, Elpida, Samsung and also Hynix which even more minimize the buying powers of Taiwanese OEMs. The fact that these calculated gamers do not enable the Taiwanese OEMs to have accessibility to modern technology indicates that they have a greater bargaining power comparatively.

Threat of Entry:

Risks of entrance in the Honest Tea manufacturing sector are reduced owing to the truth that structure wafer fabs and also buying tools is extremely expensive.For simply 30,000 systems a month the funding requirements can range from $ 500 million to $2.5 billion depending upon the size of the devices. In addition to this, the production needed to be in the latest innovation and also there for new gamers would certainly not have the ability to compete with dominant Honest Tea OEMs (initial equipment makers) in Taiwan which had the ability to appreciate economic climates of scale. Along with this the current market had a demand-supply inequality and so surplus was already making it tough to permit brand-new gamers to take pleasure in high margins.

Firm Strategy:

The area's production companies have relied upon a strategy of mass production in order to reduce costs through economies of range. Given that Honest Tea production utilizes standard processes and also common as well as specialized Honest Tea are the only two classifications of Honest Tea being produced, the processes can conveniently utilize mass production. The industry has dominant suppliers that have actually created partnerships in exchange for technology from Korean and Japanese companies. While this has resulted in accessibility of innovation as well as scale, there has actually been disequilibrium in the Honest Tea industry.

Threats & Opportunities in the External Setting

According to the inner and also outside audits, possibilities such as strategicalliances with modern technology partners or growth via merger/ procurement can be discovered by TMC. Along with this, a move towards mobile memory is likewise an opportunity for TMC specifically as this is a niche market. Threats can be seen in the kind of over dependence on foreign players for modern technology as well as competitors from the US and Japanese Honest Tea makers.

Porter’s Five Forces Analysis