Introduction
Jacob’s cream crackers was first manufactured more than 50 years ago, and was one of the first few renowned British biscuit brands to be available in Malaysia. Jacob’s is a brand name which is synonymous with quality and wholesome nutritious goodness – a reputation that has endured over generations. Jacob’s success can be attributed to the company’s uncompromising standards in manufacturing high quality biscuits, its continuous research and product development, and its commitment to ensure that its product are relevant to changing consumer lifestyles, needs and taste buds. The Jacob’s range of products has grown and evolved from a plain cracker to a comprehensive range of quality crackers and biscuits, including Cream Cracker, Weetameal, Hi-fiber, Low Salt Hi-fiber, Hi-Cal and it’s Oatmeal biscuits.
5 forces model of competition at Jacobs Biscuit
The strength and characteristics of a firm that operates in the same industry will differ from one to another. According to porter 5 forces model of competition, there are 5 forces model of competition which are substitute product, threat to new entry, potential new entrants, suppliers, buyers and rivalry among competing sellers. These 5 elements could be seen in Jacobs firm whereby Jacobs has been the choices of people for biscuits crackers.
For the first element of substitute product, it can be defined as the existence of a similar product. Substitute product can be it may different than the industry since the substitute’s product is always present. However, substitute product could cause buyers to switch from one product to another product due to many firms that create a diversified product but still similar to the product. Buyers will compare the prices of one product to another product. Comparatively cheaper and lower prices make the buyers to buy substitute product. In the case of Jacobs, other firms that are similar to Jacobs will be Hup Seng biscuits, Hwa Tai, and any product that relatively similar to jacobs firms which produces cracker. On the other hands, the probability to buy the substitutes product is much easier since Hup Seng and Hwa tai firms were relatively cheaper and easier to buy at rural area. For example Jacobs cream cracker sold at range of RM 12 for 800g while Hup Sen cream crackers were sold at range of RM 11 for 700g. When this happen, it can become threat to Jacobs firms since the prices are relatively much lower than Jacobs. When the threat of substitutes is high, the industry profitability suffers. However, Jacobs seems to find ways to branding their product by creating a patent that used only wheat cereals in their cracker product.
The second element that can be seen is the threat to the new entrants. New entrants to an industry could bring new capacity and a desire to gain market share that puts pressure on prices and investment necessary to compete with other firm. Particularly when new entrants are diversified from other markets, they can leverage existing capabilities to demonstrate their competition. Which mean to say that when new industry in cracker firm exist in Malaysia, it all become a threat to the existence industry since the firm market share will relatively fall. The same thing happen to Jacobs firms whereby many new producer on cracker entering the industry in Malaysia such as Munchy, Julie biscuits, or tiger brands. This commonly product is much easier to enter since the product is using the common technology such as the machine and little brand franchise.
The next element would be buyer bargaining power. In this term, buyer would refer to the firm who distribute the industry product to the consumers. As for the bargaining power of buyers, it refers to any potential buyers that are likely to bargain down the prices charged by the firms in the industry in order to increase the firm cost by demanding a better quality of a product. In this case, buyers have the purchasing power to buy the product and they can select any product that meets their demands. Although Jacob produces a healthy product, many diversified product can be found in Malaysia crackers industry and they are willing to buy the product not only for healthy reason, but it is also for satisfying their needs. Due to the fact that many Malaysian citizens were able to purchase anything especially increasing in the economy consumers were willing to pay extra money to buy another product that meets their criteria. In this case, Munchy diversified product can allow consumers to buy the product instead of buying Jacobs crackers.
For the supplier bargaining power, suppliers refer to the firm that provides an input to the industry. Meanwhile, bargaining power in these terms refers to the potential of increasing in suppliers prices of input. This could range from labor, raw materials or even the transportation. Suppliers are concentrated or differentiated which mean to say that if there are only a few suppliers (or one) in the market, the suppliers will have more leverage because of the lack of available alternatives. This can see whereas Jacobs cracker were the leading pioneer in making crackers that using wheat, oat, grains and high degree of calcium. Jacobs supplier The last element would be rivalry among competing sellers. Rivalry refers to the competitive struggle for market share between firms in an industry. The higher rivalry among established firms the more threat to firms profitability. The strength of a firm could be affected by the rate of industry growth. This can be seen whereas a great number of a similar firm has been in Malaysia biscuits industry and rivalry may depend upon life stage of industry and whether or not the market is growing fast. For instance, Munchy, Hup Seng, Hwa tai, or even Julies has made them to growth unevenly. If one firm gets affected, it could cause the other firm to fall since it can influence each other. Such as the popularity of Jacobs cream cracker has made Hwa Tai company to produce the similar product. To conclude, the 5 forces model of competition could uphold the firm’s strategy to uphold their product in the market. The 5 forces jointly determine the profitability of industry because they shape the prices which can be charged, the costs which can be borne, and the investment required to compete in the industry. Before making strategic decisions, the managers should use the five forces framework to determine the competitive structure of industry. Jacobs for instance, they are well known for their healthy cracker since they used a wheat content compare to any product that is similar to them.
References
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A., (2012). Crafting and Executing Strategy: Concept and Cases.
