Lindt Porter Five Forces Analysis
Five Forces analysis of Lindt covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
When it comes to premium chocolate bars, one must think of Lindt chocolate, considered a very premium brand in this category. Lindt chocolate has very low to fear about the threat of new entrants. This is mainly because the brand has established a strong market presence with its consistent and high-quality product. It is majorly famous for its premium dark chocolate, which is 85% cocoa. For any new entrant to enter this market, he has to overcome several barriers to entry which are quite significant such as the technology and the knowledge required to make such a premium chocolate brand. It is a very capital-intensive job, and it’s filled with several significant players that currently dominate the market; hence the threat of new entrants is significantly low. Also, given the fact that Lindt is one of the market leaders, we can safely say that the threat of new entrants for Lindt chocolate is relatively low.
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This concludes the threat of new entrants in the Lindt Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Lindt:
The threat of substitute for a premium dark chocolate bar is quite a few, players in this category have continually developed a differentiating factor amongst themselves, and there are quite a few alternatives that fulfill the same demand that is to provide a rich bittersweet taste that is filled with the taste of cocoa. Since Lindt chocolate does not produce a bar of sweet chocolate that simply satisfies one’s craving for sweets, instead they provide a rich dark chocolate experience and hence the substitute that applies to a standard brand of chocolates such as Cadbury earnestly does not apply to Lindt.
However, we cannot completely rule out the threat of new substitutes; this is because people can always find the same taste of cocoa in a dark coffee. With a very small and low level of substitutes because of the distinctive desires and needs that the Lindt chocolate fulfills, we can safely say that the threat of substitutes for lent chocolate is relatively low.
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Bargaining Power of Customers:
In the Lindt Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The bargaining power of customers in the case of Lindt chocolate is relatively low. This is mainly because of 2 reasons, the fact that the chocolate provides a premium dark chocolate experience that one associates with the perceived brand value rather than the actual value of the product, the second reason is the fact that Lindt chocolate sells directly to the customer that is it’s a B2C company. Because the chocolate provides a premium experience and its value is associated with its perceived value rather than the product’s actual value, they need to ensure that there is minimal bargaining power with the customers. Because of the premium image of the brand and the fact that it’s a market leader in its own segment, it provides very little bargaining power to the customer to ensure that its perceived brand value does not deteriorate.
Hence, we can conclude that the bargaining power of the customer in the case of Lindt chocolate is relatively low.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Lindt:
Lindt being in the premium dark chocolate market segment, for them, a primary raw material is cocoa; they have developed a sustainable farming system and have made contracts with countries like Ghana, Ecuador, Madagascar, as well as the Caribbean. To ensure that their brand value and image do not deteriorate, they need to ensure the quality of the product that is the premium dark chocolate does not change for this; they need to provide a consistent and constant supply of cocoa beans that are of similar quality. With various big companies like Nestle also having cocoa as their primary raw product, the demand for this raw material is constant. Hence, the suppliers hold a moderate amount of bargaining power. However, lint is also aware of this and has ensured that the suppliers do not gain a significant amount of power by implementing various countermeasures. Such as predetermined and long-term contracts with cocoa producing countries like Ghana, Ecuador, and Madagascar. Hence the bargaining power of suppliers in the case of Lindt chocolate is moderate.
Competitive Rivalry:
The impact of key competitors in the Lindt Porter Five Forces Analysis is as follows:
The competitive rivalry in the premium dark chocolate market segment is moderate. This because there are few players who have their own specific domains and have their own target market segments. One of the main reasons for this is also the fact that Lindt chocolate is a more experience-based product and even though the switching cost for a customer might be low, but the brand loyalty is high in the segment. It is extremely difficult for any company to capture each other’s market share; hence they usually tend to compete in their own respective market segments and ensure that their market share is not lost. Also, the fact that this is a very niche market and Lindt chocolate is a market leader with a premium brand image it is extremely difficult for its competitor to compete with it.
Hence, we can safely say that the competitive rivalry in the case of the premium dark chocolate market for Lindt chocolate is moderate.
To conclude, the above Lindt Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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