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Rockware - Industry Analysis and Positioning Strategy


In order to survive from the changing environments, Rockware was required to analyze the structure of the industries it was in to see whether the industries were attractive or not.  Then it needed to review its positioning strategies to compete in the future.

1.   Industry analysis

Porter¡¦s Five Force model was used to analyze the structure of the principal industries in which Rockware was competing: the glass container industry.

New entrants

Entry into this market would be fairly difficult.  Capital requirements for glass containers were huge and the manufacturing technology was lack of flexibility.  For example, a glass container plant could not be used for manufacture of any other form of glass product and different types of colors of bottle glass.  Furthermore, the costs of running the business were also severe such as the costs of switching from one product to another.  Hence, economies of scale were required for cost advantages.  This had made the business unattractive and hence, the threat from new entrants was low.

Bargaining power of buyers

The bargaining power of buyers was high for several reasons.  The purchase of glass container was usually in large volume.  In addition, buyers could shift the purchase to other suppliers easily especially imports were popular in UK, or to use other substitutions.  Finally, the stagnant of the industry made the bargaining power of buyers even higher than before.

Bargaining power of suppliers

The bargaining power of suppliers was high.  The raw materials of glass container relied heavily on monopoly suppliers (the natural gas with British Gas, the Silica sand with BIS and soda ash by ICI) who had very strong control over the available sources of supply.

Threats of substitution

The threat of substitution was high such as cardboard, PVC and PET.  The benefits of these substitutes were cheaper, lighter, and less breakable than glass.  There was also significant increasing use of plastics in particular PVC and PET due to technology improvement on gas containment, and the progressing of recyclable PET.

Rivalry among existing firms

The industry was in static growth or starting a decline stage of its life cycle, which faced a natural tendency for more intense rivalry.  The fixed costs of running the business was high and the existing firms were inclined to cut prices when they had excessive capacity.  Profitability therefore tended to be lower.  The exit barrier was high also for the heavy capital investment so firms wanting to leave might be restrained.

Based on the above analysis, the glass container industry in UK was not attractive except there was someone who could change the rules of industry with newer sets of critical success factors. 

Comparing with glass, plastics like PET was an attractive industry for its advantages over glass containers as well as the acceleration of technologies.  Although it was also a highly competitive industry, plastic was in its growth stage and could generate more profits if one could gain market shares and competitive advantages.

2.   Positioning strategies

It was assume that Rockware would want to remain in the glass container as well as plastic industries.  The company could use consolidation and latent position as its positioning strategies (Warwick, 2001).  By means of consolidation, the company as a market leader in the glass container industry, could use this strategy to build and protect its positioning.  By means of latent position, it could identify unserved or latent customer needs on plastics industry.  Its positioning strategies should include attributes, prices/quality and product users.

Attribute

The company would need its R&D to develop competitive advantages on attribute, product features or customer benefits that were ignored by competitors.  For its glass container industry, was it possible to develop unbreakable glasses, etc?  The shape of glass bottle could be designed in square shape for better packaging.  For plastic industry, was there any possible way to improve further the gas containment?

Price/quality

The company would need to evaluate its value chain to ensure that they got cost advantages and in turn price advantages over its competitors.  It also needed to provide service or features that would be valued by the customers.  For glass container industry, the company might consider enhancing its after sales service, such as offering collection of bottles from its customers.  For plastic industry, was it possible to provide service to collect after-used containers for recycling purpose?

Product user

There was strong customer perception that milk tasted better from bottles and kept fresher in them.  So for glass container industry, the company might develop its positioning strategy by associating its products with this class of users.  This might even extend to other products such as beers, wines, sauces, etc.  While for plastic industry, the company might sell its convenience.

3.   Conclusion

As a conclusion, the glass container industry was not attractive but plastic industry was in growth stage in its life cycle.  In order to remain competitive, Rockware needed to review its positioning strategies.  It was suggested to use both consolidation and latent position strategies that focusing on product attributes, price/quality and product user to build and protect positioning in the glass container industry, and identify unserved customers for plastic industry.   


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