A study in the field of managerial economics

1. AN ANALYSIS OF PORTER’S FIVE
FORCES FRAMEWORK IN THE
BISCUIT INDUSTRY
Arushie Marwah
Roll No. 1056
Semester III

2. Porter’s Five Forces Framework
 Porter’s five forces framework models that
competitive interaction in any industry is
influenced by five forces.
 The framework has helped businesses become
more profitable and government to stabilise
industries.
 If effectively applied, the five force framework
helps develop business strategy to maximise
profits.

4. The Biscuit Industry
 The Indian Biscuits Industry is the largest among
all the food industries, with a turnover of around
Rs.3000 Crores.
 India is known to be the second largest
manufacturer of biscuits in the world, the first
being the United States of America.
 Biscuits were assumed as sick-man's diet in earlier
days. But today, as a result of them being easy to
carry, tasty to eat, cholesterol free and reasonable at
cost, they have become one of the most loved fast
food products for every age group.

5. Trends of the Industry
 According to The Federation of Biscuit Manufacturers of India
(FBMI), a steady growth of 15 % per annum in the next 10
years will be achieved by the biscuit industry of India. Besides,
the export of biscuits will also surpass the target and hit the
global market successfully.
 The Indian biscuit market is currently 1.1 million tonnes per
annum at Rs 50 billion. About 90% of Indians buy and eat
biscuits
 The largest consumers of biscuits are the states of Maharashtra,
West Bengal, Andhra Pradesh, Karnataka, and Uttar Pradesh.
 Biscuit are predominantly consumed by people from the lower
strata of society, particularly children in both rural and urban
areas with an average monthly income of Rs. 750.00.
 The Biscuit industry employs almost 3.5 lakh people directly and
30 lakh people indirectly.

6. Biscuit Production in India

7. Breakdown of the Biscuit Industry

8. Growth in Sales of Biscuits

9. PORTER’S
FIVE FORCES

10. Bargaining Power of Suppliers
 The biscuit industry’s principal raw material requirements are
that of wheat flour, sugar, shortenings, salt, sal volatile, sweet
jelly, glucose, and starch.
 High supplier concentration across the country for the supply
of wheat flour, sugar and salt.
 On the other hand, for the supply of the other raw materials
such and sweet jelly, starch etc. mainly imports are relied upon.
 Also, the biscuit processing machines are usually purchased
from certain select suppliers as such advanced technology is
not easily accessible in the Indian markets.
 Inputs are relatively standardised and the government by
means of FBMI ensures certain ceilings on prices of supplies.
 Thus, the threat of bargaining powers of suppliers is limited.

11. Bargaining Power of Buyers
 Availability of numerous substitutes.
 Low switching costs.
 Prices of most biscuit brands are
kept within the reach of the budget
of the ordinary man in both urban
and rural areas.
 Strengthened distribution channels.
 The power of the buyers in the
biscuit industry is such that the
general situation o the market for
biscuits has grown towards full
fledged competition through brand
development, range of products
offered, delivery, advertisements and
packaging.

12. Industry Rivalry
 Immense competition and a multitude of producers.
 Cyclic nature of demand ,ensures an environment of cut-throat
competition.
 Every manufacturer seeks to gain a competitive edge.
 Large scale manufacturers like Cadbury, Nestle and Brooke Bond tried
to enter the biscuit market but could not successfully hit the market.
 Even today, though a battery of new players such as Kraft, Pepsico,
Glaxo etc are waiting to enter the biscuit market, with the exception of
Horlicks Biscuits most MNC’s have ceased production in the country.
 Therefore, even though there exist numerous players in the biscuit
industry, the Indian market is still largely un-penetrated offering scope
for ample growth.

14. Segments of the Industry
Criteria Organised Sector Unorganised Sector
Dominant Players Parle, Britannia, ITC Small bakeries, Cottage and
household manufacturing
Share in production 60% 40%
Scale of manufacturing Large scale with more
investment
Smaller scale of
manufacturing and lesser
investment requirements.

15. Threat of Substitutes
 Numerous substitutes, in both the organised as
well as unorganised sector can be found in the
biscuit industry.
 Extremely price sensitive industry.
 Low switching costs.
 Profits constrained by the presence of more
alternatives as if one brand decides to increases
its profits through a price hike, the consumers
would shift their income to another alternative
manufacturer.

16. Threat of New Entrants
 Governmental Regulation and Policies
 Multiplicity of food laws
 Hike in central excise duty on biscuits
 Taxes deterring growth of the industry
 Economies of Scale
 Fixed Investment subsidies given by the
government
 Dynamic consumer preferences

17. WAY FORWARD
FOR THE
INDUSTRY

18. Changing Dynamics of the Industry

20. Thank You!