Sample Solution

hence causing the barrier to entry is high. The following factors are some reason that justify the low threat of entry.

The economies of scale is hard to achieve therefore, causing the production to be more expensive for new companies. Production differentiation is strong as in this industry all company sells differentiated products. Customers also look for differentiated products. Therefore, the threat of entry is low. Capital requirements are high in this industry and its hard for new companies to set up businesses with the same expenditures incurred by existing companies. Government policies also ensure that many regulations need to be followed before companies can start selling their product in the market. This enforcement makes it hard for new companies to enter. Therefore, the threat of entry is low. However, access to distribution channels is high threat of entry as it is easier to ensure that the product is out in the market by franchising. To tackle this problem, A2 milk can take focus on creating more differentiated products from the new entrant. This can help build a strong brand identification.

Then threat of substitutes

This factor determines to what consumers can choose between the products and services as businesses are price taker (My Accounting Course, 2019).

There are actually very few substitutes that are available because many milk industry have A1 and A2 milk together whereas A2 company only cater A2 milk contents. This means that the threat of substitute is low. Furthermore, A2 milk pricing is much cheaper than milk of high quality. This shows that consumers are not likely to change brands, causing the threat of substitute to be low. To sustain competitive advantage in this industry, A2 milk can further promote their products with more distinct products. Differentiating its products from other products by providing unique benefits to meet consumers needs.

The bargaining power of buyers