Competition among Existing Providers
Thanks to the long history on the market and a firmly established supply chain, TopGlass Pte Ltd has a firm production basis. Besides, it was founded early in the course of development of the UAE’s economy, which allowed it to secure strong ties with the buyers. The direct sales model which was used by the company for most of its life cycle also contributed to customer loyalty since TopGlass was able to work closely with the customers. On the other hand, the current growth rate of the F&D industry also means that the direct sales method becomes far less effective. This creates an advantage for the rival companies which use distributors to cover a larger segment of new entrants. As a result, the intensity of the existing competition is medium.
The Threat of New Entrants
The glass industry relies on a comparatively simplistic set of raw materials, most of which are readily available in the UAE and can easily be imported at a low cost. In addition, most of the production cycle involves the use of highly specific equipment which is fairly standardized across the industry. As a result, any business with a sufficient budget can enter and draw customers using aggressive marketing strategies and attractive pricing models (Wilkinson 2013).Besides, the industry of glass packaging is fairly generic, meaning that on most occasions the products are not chosen based on their unique characteristics. This gives an upper hand to the new entrants. On the other hand, the packaging segment is not lucrative enough to draw sufficient attention. Thus, the threat of new entrants is moderate.
Bargaining Power of Suppliers
Two main raw materials involved in the production of glass are silica sand and soda ash. While there are no substitutes for each of them, both are abundant in the UAE. Soda ash, for instance, is produced at numerous factories domestically and can be easily imported. Such availability forbids the suppliers from raising the prices. In addition, TopGlass currently owns a sand refinery facility outside Abu Dhabi, which further diminishes the dependence on external factors. Thus, the bargaining power of suppliers is low.
Bargaining Power of Customers
F&D industry, the main customer base of TopGlass, is strongly dependent on the packaging industry. In addition, a fluent and dynamic economic environment backed by a rapidly growing tourist segment is characterized by sharp competition, which creates additional pressure on the producers of beverages. On most occasions, there is little space and time to switch to another supplier. In addition, the newly started product line of luxurious containers for the premium segment requires specific and expensive equipment, not to mention the cost of launching a new design. Unless a new wave of low-cost containers appears on the market, the bargaining power of customers remains weak to moderate.
Threat of Substitutes
The main substitute for glass packaging is plastic containers. In the non-alcoholic beverage segment (major share of products), as well as food packaging (minor share) the use of plastic bottles and containers is a popular move to reduce costs. In the alcoholic beverage industry (major segment), however, this is relatively rare. The pharmaceutical industry (minor segment) codifies the use of containers, which minimizes the unpredictability. The same can be said about the cosmetics industry (minor segment). Finally, the luxurious segment in both F&D and cosmetic industries (minor shares) is bound to use glass with rare exceptions such as expensive composites. In all, the relatively high threat of substitution in the most influential segment of the customer base is counterbalanced by the multitude of smaller segments where it is highly unlikely on the average. Thus, an estimated overall threat of substitutes is low.
Reference List
Wilkinson, J 2013, Intensity of rivalry (one of Porter’s five forces), Web.