In order to analyse dynamics of dairy industry, systematic analysis of its internal and external environment is required to be undertaken. Internal environment includes aspects related to internal weakness and strength of each element of supply chain. On the other hand, in order to analyse external environment of supply chain management of dairy sector, various defined approaches or tools can be undertaken. For this purpose, Porter’s five forces analysis has been used to define and analyse dynamics of industry. Under this approach, analysis of external environment in terms of market place under in which dairy sector operates will be undertaken. Following are the Porter’s five forces analysis:
Threat of new Entrance- Food processing or diary industry is very vase and yet to explore more and has large scale of competition within. Since dairy sector or food industry is more profitable as compared to other industries in terms of profit margins. Therefore, many companies tend to enter in this sector (Othman, 2014). This situation has threatened many existing companies because new companies will come with new and advanced technologies that can scatter existing companies.
Threat of Substitute Goods- Diary industry is very vast and easy to entre with new and improved products. Dairy industry has vast variety of products that can be substituted very easily by any other companies. Therefore, introduction of cheaper dairy products can hamper whole supply chain of organisation.
Bargaining Power of Supplier- Since suppliers is important part of supply chain in terms of linkage of business with other members of supplier chain. Supplier relations and volume of business are important dynamics of dairy industry (Othman, 2014).
Bargaining Power of Customer- One of the major focus points of dairy sector companies is bargaining power of customers. It decides success or failure of business in terms of sale revenue and sales units. Therefore, buying power of customer is critical factor to be considered.
Rivalry or Competition- In any industry, two types of competition or rivalry can be analysed i.e. healthy and unhealthy competition. Healthy completion if taken in positive manner can lead towards betterment of dairy industry as whole. However, unhealthy completion will always hamper industry and its units in long term (Othman, 2014).
From the above report, it can be concluded that there are various factors that whole together make or complete dairy industry. Business organisation involved in dairy business requires maintaining strong relation with members of supply chain. In dairy business, breeder and grower, manufacturer, wholesaler, retailer and carter are elements of supply chain. Dynamics of dairy industry can be defined with the help of Porter’s five forces that denotes external environment of business organisation. Linkage or connection of business organisation or industry with government, associations and universities exists and are required to be managed.