Uk Organic Food

Contents 1. Introduction2 1. 1 Why this effort was chosen for epitome2 1. 2 Aim2 1. 3 Brief Background of the positive nourishment producing pains2 1. 4 Competitive environment? 3 2. PESTEL synopsis5 2. 1 Political factors5 2. 2 Economic factors6 2. 3 Socio-cultural factors7 2. 4 scientific factors8 2. 5 Environmental factors9 2. 6 Legal factors10 3. Porters Five Forces epitome12 3. 1 Threat of untried entrants12 3. 2 Threat of transpose products14 3. 3 Threat of established pairs14 3. 4 Bargaining king of suppliers16 . 5 Bargaining power of demoralizeers16 4. Conclusion18 4. 1 The manufacture at present18 4. 2 Future mixtures19 5. App final stageices20 5. 1 Critique of tools and search limitations20 5. 1. 1 PESTEL framework20 5. 1. 2 Porters Five Forces20 6. References22 1. INTRODUCTION 1. 1 Why this exertion was chosen for analysis The chosen diligence for analysis in this accounting is the extreme fertilizer forage producing exertion in the United Kingdom. This encompasses groups of firms that contract similar products, in this campaign, essential sustenance disc everyplace.In recent categorys, in that location has been a heightened cognizance in the media in relation to constituent(a) tot every(prenominal)yy originated food, and a great emphasis has been placed on healthy eating and a reduction in the production of genetically modified food. As this aw arness amplifys, it is classic to analyse the attention in bargain for recount to appraise whether the industry is favour up to(p) to exist in, and to as accepted whether it is in all probability that it go forth be penet enjoind by novel competitors.A nonher reason for choosing to examine this particular(prenominal) industry is payable to the escape of an updated Mintel report, or a similar financial report, particularly since thither has been so much extra concern be placed on this industry of late in the media. In beau monde to get a better picture some what the macro- and micro-environment in relation to the UK original food producing industry, frameworks result be employ in order to analyse cultivation ab show up the industry. 1. 2 AimThe aims of this report ar to research and assess the nature of the organic food producing industry in the United Kingdom. This ordain occur by utilize two varied frameworks, a PESTEL analysis and the social occasion of Porters Five Forces in order to fully understand the competitive micro- and macro-environment of this industry. When the analysis is complete, it get out be monishmined whether the industry is favourable to drop or not, and future switch all overs in the industry exit be predicted. 1. Brief background of the UK thorough nutrient Producing Industry The term organic has been defined by the thorough sledding Trade Association as an ecological production management system that promotes and enhances biodiversity, biological cycles, and blot biological activity based on minimum use of shoot-farm in go unders and management practices that restore, master(prenominal)tain, and enhance ecological scatheony 1. In practice, this means that artificial chemical fertilisers and pesticides are not utilize, and animals are reared without the drugs that are normally routinely used 2.Protection of the environment is of great importance, and the quality of the soil is what determines whether the take a leak seat be deemed as organic or not. Historically, it was common practice to only give up relatively a couple of(prenominal) family run farms in which organic food was produced, and this could be purchased in grangers commercialises and weeer stores, such as green grocers. However, since the 1990s, organic food has had growth rates of around 20% per year, and figures from April of this year try that organic food now accounts for 1 to 2% of food sales globewide 3.This growth rate has been partly due to life-sized super grocery store filaments adopting ranges of organic foods, which is reducing the farmer to consumer link, and providing a convenient bleak way to eat organically, and also due to an change magnitude interest from the media in this industry. For instance, large super merchandise chain Sainsburys has to a greater extent than 1000 organic products, had a 14% increase in sales of its organic produce in 2006/2007, sources all its organic meat, fish, poultry, take out, and eggs from the UK and has contracts with farmers to guarantee minimum determines to ensure the long-term give of organic beef 4.A quote from Jerry Dryer, who wrote an article called thoroughgoing Lessons stated, Organic is here to stay, not a cult marching by in the night 5, which is a hopeful suggestion that the mart share is determined to increase and that spick-and-span opportunities foundation be targeted, yet this will be confirmed or denied at the end of the report. 1. 4 Competitive environment? The organic food producing indust ry consists of a large tot of small producers, who produce food which can be certified as organic by the Organic Farmers and Growers Organic Standards and the Soil Association.Due to thither being a large good turn of fragmented producers in the industry, it whitethorn be seen as a competitive market who are vying for the attention of large or small supermarket chains and stores, green grocers, and individual purchasers of organic food. Organic produce in itself is reasonably homogeneous, so all producers in this industry will be trying to sell similar products which are largely un distinguishableiated. This increases contention amongst the producers as to how they are going to get their goods interchange over the goods of a competitor.There is also the survival of the fittest of individuals ontogeny their own organic produce, which whitethorn mow the involve for the purchase of produce. The competitiveness of the environment will be discussed in to a greater extent detail w hen an analysis is carried out using the Porters 5 Forces framework 6. ? 2. PESTEL Uncontrollable, out position(a) forces that influence decision making, which thus affect the performance of an industry is known as the macro-environment. The macro-environment consists of political, economic, socio-cultural, technological, environmental, and efficacious forces, which can be referred to as PESTEL forces 7.A good definition of this framework for analysis is given by Kotler 8, which is PEST analysis is a useful strategic tool for understanding market growth or decline, demarcation position, potential and direction for operations. This is also useful for forecasting the direction in which an industry is taking, and the intensity of this alteration. Factors can be assessed and placed in order of importance, so it is clear to see what external factors are the almost pressing issues in an industry.In order to find out culture for each of the factors, secure secondary data sources sha ll we used, such as newspapers, periodicals, books, trade organisations, Government agencies information, and industry analysts results. Once this kind of analysis is complete, it is clearer to see how to take advantage of arising opportunities, and plan to prevent potential threats that may occur in the industry. The sections at a scurvyer place break down the macro-environment into six parts. 2. 1 Political factorsGovernment jurisprudence may dictate what is guessed to be organic in a particular country. This report presents at organic food producers in the UK, and this is regulated by the Organic Farmers and Growers Organic Standards 9, and the Soil Association 10. The Department for Environmental aliment and Rural Af goods (DEFRA) states m whatever outlines of what how produce should be grown and the feeding of livestock, in order for in to fulfil UK Government standards 11. These standards take leave from country to country, within and outside of the EU.This can disc ombobulate a profound wallop on the merchandiseation of produce by UK farmers, as what may be deemed as organic in this country, may not be so in an other(a). Relations with politicians carry to be upheld, as legislation is subject to change at any given time. For example, it recently has been decided to ban battery hen cages gelting in the year 2009 12. 93% of eggs in the UK market come from battery hens, so once the legislation is fully in place, this will not occur. This will increase argument in the market, as all eggs will now be from free range hens, which may affect the poultry side of the organic food industry.By adapting to beseeming the new laws now, favourable relations will be kept with politicians, and rate of flow organic egg producers will need to find new ways in which to gain market share in what may be an increasingly saturated market. The Government up-to-the-minutely provides farmers subsidies, precisely current news from May 2008 shows that the EU is lo oking to cut the money it provides, and reinvest it with incentives on looking after verdant land, rather than giving money to garter produce more food 13.This may put on farmers lack to enter the organic food producing market, as they run through extra incentives to switch their land to organic soil, that may hinder those already in the market due to the increased competition, and the lack of money to produce extra food needed to conform to demand. 2. 2 Economic factors The organic food producing industry can be largely affected by the UK economy, such as interest rates, exchange rates, emptor power, and consumer confidence, which will all now be discussed in turn.The current ongoing credit crunch, and advanced up inflation has cut chances of any interest rate cuts, and a objective threat of a downturn is present 14. Mervyn King, the regulator of the Bank of England, has previously reported that UK inflation will get hold above its target and the economy will sharply slow down 15, which does not mean good things for an industry such as this, which relies on volume buying premium quality products.If interest rates are high, then it costs more money to borrow from banks, which deters investment, and may make it harder for farmers to convert their land to organic soil and methods of production, as this is a costly business 16. This inflation may flummox any employees working in the industry to demand higher wages in order to cover any losses that they are making, which can cause a problem for employers, especially if the industry declines if there is a recession. The credit crunch has also affected housing prices, which have fallen, and a ollapse in these sales have been predicted to cut consumer spending by 8% 17, which will affect the industry. Exchange rates can affect the way UK organic food producers export their products, as a strong currency can make exporting ambitious, if foreign buyers cannot get a lot of produce for their money. Buyer power can have a strong economical patronise over the industry, as disposable income and freeness to spend can affect the sales of premium quality produce, especially as there are cheaper alternatives. The state of the economy affects spending, as if there is a recession, or before long with the credit crunch in the UK, spending falls.Organic food may be seen by some users and non-users as a premium product, so when disposable income is pull downd, this may be something which is cut back on in order to use the extra money elsewhere. If multitude are being more price conscious, new motivations to purchase the produce need to be discovered aside from price. However, many purchasers of organic food do so because of what it stands for, and is a lifestyle choice which may not be affected by a bad economy. Consumer confidence may be dented if willingness to spend decreases. The more affluent a soulfulness is, i. e. he higher wages and better lifestyle someone has, the more likely t hey are to start or bear to purchase organic food 18. 2. 3 Socio-cultural factors A major socio-cultural factor impact the industry is the media. A recent heightened awareness of organic food issues in the media has prompted an increase in organic food sales, with a 70% increase since 2002 to ? 1. 5billion in 2007 19. There is currently a bit from the media to use the upcoming 2012 Olympic games to promote organic eating, in order to subjugate an obesity crisis and to appear a fit and healthy country.This increase awareness of the importance of healthy eating and protecting the country by reducing its carbon dance step can have an effect on consumer attitudes. The effect of the media may change attitudes of people towards organic food, such as the more impetus placed on this industry in the media, means more people are aware of the benefits of eating organically. People may then change their attitudes about the way they eat, and weigh that it is worth stipendiary more for the food, even if the economy is not as strong as it could be. Figures from a recent Mintel report 20 show that attitudes towards rganic food show that people believe first gearly that the food is healthier, secondly that it tastes better, and thirdly that it is better for the environment. With these belief systems becoming widely in place, the prospect for the growth of the industry in peoples minds is increased. However, the media may too have a poisonous effect on the industry in two ways. Firstly, there has been bad press saying that the industry is losing its values, and that the industry itself is out of control due to an increased demand and people not knowing the real reasons behind why they are choosing organic 21.Secondly, increased advertising spend (even though it is relatively low 22) can draw too much attention to the industry which is not prepared to deliver the increased demand. A typical shopper of organic food has been outlined in a survey taken from the Organic Mo nitor website 23, which identifies them to usually live in an urban area in a big city, consider quality and provenance in decision making when choosing which foods to purchase, being well-educated and of a middle to high social class, and to belong to a medium to high income household.These factors have been determined of the types of people who normally purchase these premium products, and usually fall into the AB consumer base, due to a larger disposable income 24. Further analysis of recent demographic trends show that the London and the South of the UK are more willing to accept the presentment of organic produce, compared to the rest of the UK 25. With this in mind, it may be deduced that these areas are more prone for targeting, and march on context needfully to be given to where the industry should go next should these places become saturated with producers. . 4 proficient factors Technological advances in transportation means that the ease of moving produce around the UK is increased. Better roadstead and an increase in motorways have advantages for farmers to get their produce into busier cities. Transport has moreover been scrutinised in this industry in recent years if air freighting is used for the moving of food or livestock, but this will be further discussed under the environmental factors section of the PESTEL analysis.The net profit has provided new methods of selling organic produce, such as online shopping, and electronic sourcing of produce to find local organic food suppliers 26. Looking at figures from a 2007 Mintel report on organic food, box schemes and mail order have had the biggest percentage increase of usage between 2005 and 2007 (109. 2% change in this time period). The box scheme comprises of the delivery of fresh organic produce which is chosen because it is in season in the UK at the time of ordering, and many farms have used the internet in order to allow this scheme to take place.For example, Riverford Organic Vegeta bles 27 allow people to choose different size boxes, and also give information about how much CO2 emissions are given off from the transport of their produce from door to door. This shows the potential for how the increase in usage of the internet can be applied to the organic food industry. 2. 5 Environmental factors National and Global environmental issues can greatly affect the UK organic food producing industry, such as weather and climate change respectively. Without the right growing conditions for some organic produce, i. . having good, well-nourished soil, harvesting may not reap many rewards. Last year in 2007, the wettest weather for more than 240 years was recorded in the summer by the Met Office, which obviously had unseemly effects on this particular industry 28. Following this particular summer, it was reported that organic food prices would rise even further than the already premium costs that they have, partly due to the weather reducing the measure of land fit for cultivation in order to grow and harvest organic produce 29.If unseemly weather conditions do occur, the supply or organic goods will be reduced further comfort, which may strongly affect an industry that already has increased demand and not enough produce to meet this. Climate change has gained increasing coverage in the media, convincing more people than action needfully to be taken in order to protect the earth, in particular, the notion of a carbon footprint. A carbon footprint can be described as a measure of the impact of human activities on the environment in terms of the amount of greenhouse gases produced 30.This affects the organic food producing industry when organically grown produce is air freighted into the UK. The Soil Association is threatening to remove its stamp of applause from organic food which has been imported by air, as they believe this to be increasing the carbon footprint, and going against the morals that organic food stands for 31. This change may ben efit UK organic food producers, as there will be little competition coming from overseas, but may be of detriment for informal UK flights, if this is how they normally transport their goods around the country.The danger here is that people who already purchase organic food may instead switch to locally sourced produce, be it organic or not, in order to help the local community, and to do their bit to reduce the carbon footprint. There may be an opportunity here for organic food producers to also trade locally, so that people can get the best of some(prenominal) worlds. A benefit of organic produce is that it attempts to ensure that minimal amounts of pesticides and fewer artificial methods are used in the growing of the food.Only 25% of organic food carries pesticide residues, compared to 77% of conventionally grown food 32. This reduces harm to any soil or wildlife in the area, and is reported to have added health benefits, all contributing to less of a bad impact on the enviro nment from harmful chemicals. 2. 6 Legal factors Legal changes in the United Kingdom may affect the behaviour of firms and producers within this particular industry. Back in 1984, the Food Act was introduced, which outlined the description and purity of foodstuffs, and affected the way in which food could be produced 33.This legal act is still completely applicable today, and is regularly updated, notably affecting organic food producers in how they can describe and label their food. As well as an organic product having to meet UK organic standards, it also must(prenominal) abide by this Food Act when selling to respective buyers, so as not to mislead customers, i. e. it must be what they claim it to be, in this case, organic. A European ruling in 2007 states that for food to be labelled free of genetically modified ingredients, it must contain 0. 9% or less of such elements, which may in turn affect the price of organic food 34.Producers need to factor these sorts of legal require ments into pricing how much they are going to sell their food for. For the past few years, recorded minimum wage has risen, with October 2007 being the last review at ? 5. 52 per hour for workers time-honored 22 and over, ? 4. 60 per hour for workers aged 18-21 inclusive, and ? 3. 40 per hour for all workers under the age of 18 who are no longer of compulsory school age 35. These increases may pose problems for producers who cannot gift to meet these payments, especially if inflation ontinues to rise, and the credit crunch continues to beckon a recession in the financial market. If the producers cannot afford workers to help them look after livestock or harvest crops, this may pose to be a big threat as to whether they can afford to meet the requirements of customers. ? 3. PORTERS FIVE FORCES The micro-environment is a set of forces that directly impacts the ability of an industry to serve its customers, which were described by Michael E. Porter in an uninflected framework as fiv e forces that determine the competitive intensity of a market.This can also be described as the attractiveness of an industry 36. It must be remembered here that even if a market is determined to be attractive, this does not mean that every firm in the industry will concede the equivalent profitability. Only by having uniqueness in resources or a distinctive business vex can help to achieve greater profits. The five forces suggested by Porter are the threat of new entrants, threat of substitute products, and threat of established rivals from horizontal competition, and the talk terms power of suppliers, and bargaining power of buyers from straight competition 37.The strength of these forces combined determines how competitive the industry is, and can determine whether it is favourable to enter. In annexe to Porters Five Forces, the term industry will be used to describe any products which are similar, and are close substitutes for each other. These five forces that affect how competitive the industry is will be discussed below. 3. 1 Threat of new entrants In order to assess the threat of new entrants in the industry, it needs to be assessed whether the barriers to entry in the UK organic food producing industry are high or low.This will be looked at in relation to economies of scale, product differentiation, cost disadvantages in relation to the capital required, and opening to distribution channels, in relation to UK organic legislation. Economies of scale occur when the costs of producing are reduced from making more units, as it is more efficient to increase output. Some organic food producers may benefit from the fact their purchasers may be large supermarket chains, who have the ability to buy in bulk due to the benefits of their economies of scale. Organic food producers an then sell their goods to these chains, who realise that their customers are becoming increasingly aware about the benefits of this quality produce. However, due to these chains being in a position to buy bulk, in order to compete in this market, organic farmers may have to sell their goods at a cut price if the supermarkets want to sell it on to turn a profit. In this case, new entrants may be put off from entering the market if they cannot afford to compete with already established providers of organic food to these main players.Product differentiation is an issue, as the organic products in this industry are largely homogenous. If new entrants wanted to finish up the market, they would have to think of advanced(a) new ways for buyers to choose their products over another product which is the same as the one they are offering. This does however mean that producers already in the market may have less competition enter alongside them, as long as the existing producers offer fair prices and top quality food, with well established networks.Cost disadvantages may pose a threat to new entrants, as a large amount of capital is required in order to enter the m arket. Firstly, modern agri-technology is dearly-won to purchase, and the largest cost of deciding to produce organic food is the conversion of land 38. In order to convert land so that it meets the UK Organic standards requires a great capital investment, which is one of the reasons why the supply is still short. This may put off potential entrants to the market if they believe they cannot afford to make their land meet national requirements.These national requirements are subject to change, so barriers to entry can be heightened or let down at given times, depending on what is decided by the ruling bodies. This may also affect world(prenominal) entrants, as national standards vary in different countries. What is seen as organic in one country, may not meet the requirements in the UK, so producers may be protected from further competition in that respect. For example, new regulations in Japan caused the majority of products to lose their organic status 39.This also ties in with admittance to distribution channels, as UK producers may be fighting for space on supermarket shelves or stalls in a local farmers market, and only the best will survive. Even though supply is short, a peculiar(a) amount of space is still given to organic produce, which on one hand may deter entrants into the industry, but equally may give some producers wishing to enter the market a larger incentive to increase awareness about organic produce, and try to meet that supply in innovative new ways. 3. 2 Threat of substitute productsSubstitute products are products which can fulfil the same function, but from a different industry. In the case of the organic food industry, substitutes can occur in the form of different kinds of eating, or fad diets, such as calorie-counting healthy eating, and or locally sourced conventional produce. First to be discussed is reduced-fat and reduced-calorie food, which may appeal to the organic food shopper. If people are buying organic food as a misun derstanding of what it really is, and do so for the health benefits, then they may switch to special healthier eating options, rather than organic food.This threat however has been reported to be minimal at the moment, as figures in a Mintel report from 2007 on organic food show that organic food is experiencing a much greater growth than reduced calorie options 40. The reduced-calorie options, as well as serviceable foods, still continue however to rise in popularity. Locally sourced conventional produce also poses a threat to the organic food industry, as some people may choose to support local farmers rather than to choose organic produce.This is especially punishing on the organic food industry, as more farmers may decide not to convert their land to organic if people are more willing just to buy conventional locally produced food 41. This threat may encourage organic farmers however to sell produce locally, so they are covering both segments of their target market. An exampl e of this threat is present by milk, as demand for organic milk far exceeds the supply, so people are face up the dilemma of having to buy non-organic locally sourced milk, as this is a necessary substitute for people buying milk in the premium market 42.Organic food may be seen as necessity to some, but to most it is a luxury, and conventional foods can replace the premium priced, undersupplied organic food. 3. 3 Threat of established rivals The simplest rival in this industry may be seen as people who grow their own organic produce in their garden or local allotment. This reduces the need for organic farmers to sell their produce to consumers, and this has the potential to reduce the need for them to sell, as it may be cheaper for people to grow their own. Aside from this threat, there are other forms of competition within the industry.Rivals in the industry have different ways of competing against each other, including varied forms of price, trade strategies, and innovation tec hniques. Firstly, a sustainable competitive advantage can be gained through the innovation from producers in the industry. For example, organic farmers may decide to provide their goods only to local outlets and consumers, which increases the likelihood of people wishing to buy products which are organic and sourced locally. This can provide a competitive advantage over organic producers in the UK who have a larger carbon footprint by delivering their products across the country.Competitive rivalry may continue here as more competitors enter the market to satisfy the growing demand for organic produce. As new entrants penetrate the market, it needs to be increasingly thought of new ways to differentiate products, as the nature of the produce in this industry is largely homogenous. There is not a large diversity of competitors, as organic produce is the same from one farmers land to another, so competition will be high in order to get people to choose one farmers particular produce.T his is also true when considering who will purchase this food, as supermarkets are increasing their ranges of organic food, so competition to get produce chosen to be sold in these will be high 43. If a supermarket already purchases a particular farmers produce, it may be difficult for other competitors to penetrate the market if customer loyalty already exists, so new ways of doing so will need to be thought of, such as competing on price. This, however, will only be possible to a certain extent, as a profit still needs to be make by the producers in order to continue their business.Existing firms may compete in this industry through diversification of how the produce is offered, as some farmers may set up a market stall or store in order to deliver their produce to the consumer. An advantage of this is the added convenience to consumers of having a place they know they can go to in order to source locally produced organic food. An example of this is the ever increasing popularity of the chain Planet Organic, which is continuing to expand upon its outlets in urban areas in London, so that people dont have to live in rural areas in order to get there organic food 44. 3. Bargaining power of suppliers There is an estimated 4630 producers in the organic market who have converted their land to organic soil, and this is ever increasing 45. Even though this is still increasing, it is high-priced to convert conventional land, so this may be one of the reasons for a relatively low number of suppliers in this industry. This section focuses on whether suppliers in the organic food producing industry have high or low amounts of power over the happenings in the industry. The brand of organic food may be seen as powerful, as there is a high consumer demand for these products.This gives the suppliers the added advantage of being able to choose how and where to supply their produce. However, even though this increases supplier power, the customers for their produce are fra gmented, so there may be a reduced bargaining power over price, as there is only so low that producers are able to offer their goods for. Organic food in itself is a unique offering, which gives an alternative to conventionally produced food, and can satisfy the needs of particular consumer groups who crave quality and are concerned with the provenance of what they eat.This allows suppliers to have a greater power over the conventional or locally sourced produce, as organic food is seen as a lifestyle choice and not just one of convenience or necessity. Figures from Mintel show that 65% of people shop in supermarkets where the food is of high quality and is fresh 46. This choice from consumers gives suppliers the added advantage of being able to provide a service that people actually want. 3. 5 Bargaining power of buyers The bargaining power of buyers in the market can have a great effect on the industry itself, which will now be outlined in terms of how much power they have over th e industry.Buying power may be deemed to be relatively low in some respects, but high in others in this industry for a number of reasons. With an increase in demand for organic produce, a large amount of buyers are competing for a relatively short supply of food. This may mean they are willing to pay higher prices for the produce, due to its availability being decreased. This supply shortage was outlined in The Grocer, which shows sales were up to ? 3. 1billion when they reported in March 2007 47. However, few large buyers, such as large chains of supermarkets, may have an increased buyer power due to suppliers wanting their goods to be sold in these stores, as they can ensure produce is sold via a contract for a certain period of time. This reduces uncertainty for suppliers, and ensures less food is spoiled. The fact that this industry contains a large number of dedifferentiated suppliers may mean that buyers have more power over who to choose to supply their produce if there is a large amount of suppliers in that particular area.The cost for buyers of switching suppliers for produce is very low, which further still increases their power, assuming that there is an appropriate amount of supply existing. Buyers are aware that there is a shortage of supply of organic produce, so this may give them less power over suppliers, and over the industry in general. It has been previously mentioned about the increased demand over supply, so buyers may have to pay the prices being offered to them by suppliers if they want this non-conventionally grown produce.Buyers may also have higher power in some respects due to existing substitute products, which have previously been discussed. There is an opportunity in some cases for people to switch to locally sourced conventional food, rather than organic food. This can increase buyer power, if they decide to refrain buying organic food altogether, which may force producers to reduce their prices, or just to exit the market. ? 4 . CONCLUSION 4. 1 The industry at present Looking at the information which has been discussed in the 2nd and 3rd sections of this report, deductions and analysis can be made about the industry at present.In its simplest form, the UK market for organic food is reported to be worth ? 1. 5 billion in 2007 48, and this is continually growing. Issues affecting the macro-environment include current Government legislation managed by the Soil Association and the Organic Farmers and Growers Association, buyer power and spending habits in the organic food industry, effects of the growing media attention on the industry itself, new ways to sell produce, and environmental concerns facing producers. Issues ffecting the micro-environment include the threat of new entrants joining the industry due to a lack of supply and an increase demand, substitute products being present such as locally sourced produce, established rivals having better distribution links, suppliers having increase amounts of po wer due to the increased demand from consumers, and the buyers having relatively low power due to the lack of supply. This is a small summary of how the industry can be seen at present, and from looking at the information collected, there are various reasons why it may or may not be a favourable market to enter.The fact that demand is high but supply is low is a good reason for wanting to enter the market. This would imply that any produce made would be easily sold, and suppliers would be in a better position to bargain on higher prices, as they are well aware of this demand. However, there are issues in being able to enter this industry. The initial outlay costs are high, as it is expensive to convert land into what is considered to be organic, to buy new technology required to grow and harvest produce in the methods stated by the necessary authorities.It may then be difficult to sell produce in certain areas if people do not agree with the transportation used to get the produce th ere in the first place. These are factors that need to be taken into consideration when looking at the industry at present, but with expansion set to continue, if the capital is available, it seems favourable to enter. 4. 2 Future changes Increased acceptance of organic food means that the future of the industry looks good for the moment.People are beginning to accept organic produce into their terrene lives, and with reported health benefits of switching to these products, sales are increasing, with analysts predicting that sales will double before the end of this decade 49. Increased awareness in the media and new studies into the goodness of organic produce is driving sales and increasing demand. The notion of eating well is of key importance to the Government in what they suggest to avoid an obesity crisis in the UK, and organic food may be seen as a way of doing this.However, it must be remembered that the future, as with any industry, can be uncertain. Factors that must be fa ced and planned for in the future include bad press in the media, substitute product switching, and a change in legislation. If the media publishes bad press about whether there are really any extra health benefits from paying extra for organic food instead of conventionally grown food, the demand may fall and substitute products used instead.Products such as locally sourced food are fighting for advertisement space in the media also, so people may switch to this in the future in order to protect the earth, and reduce their carbon footprint. This can all be affected by the hype that is created in the media at that particular time. Standards in legislation are also subject to change, and if this is to change in the future, it may be the case that fewer farmers can afford to convert their land into organic soil, which will reduce the supply of organic food further.If this occurs, the popularity and publicity of this industry may decline. These are issues that need to be kept in the p rincipal of the industrys mind, and plans to avoid this, such as proving the benefits of switching to organic produce, need to be made. ? 5. APPENDICES 5. 1 Critique of tools and research limitations 5. 2. 1 PESTEL framework Advantages are listed below Allows the analyst to remove themselves from the industry and look at it more objectively by adapting to the new environment house avoid taking actions that will lead to failure Can see the context of the industry Limitations are listed below Time consuming Is done by an individual, so important factors can be missed May be difficult to know what to include under each heading, so hard to follow by other people reading the report Industries are constantly changing, so once it is written, it may have already changed PESTEL analysis only covers the remote environment 5. 2. 2 Porters 5 Forces Advantages are listed below Can effectively analyse competition in an industry, and help decide how to beat competitors Develop strategies for act ion from the information found and apply them to gain market share in an industry Looks beyond obvious prompt competitors, and focuses on substitutes to the organic produce being offered wider market view Limitations are listed below Also is carried out by an individual, so things relating to competition in the micro-environment may go unlooked This analysis is a static framework, and the industry is constantly changing, so it may not be applicable immediately after it has been writtenThese limitations imply that a scheme cannot be made just by looking at this report alone. This point may the most important research limitation, as this cannot be taken as to what the industry is like presently. bare-assed research is constantly being carried out, and figures continuously change, so up-to-date information is required for marketing strategy development. ? 6. REFERENCES 1NOSB Definition, http//www. ota. com/definition/nosb. html, Accessed 18/4/08. 2What Is Organic? , http//www. soil association. org/web/sa/saweb. nsf, Accessed 18/4/08. 3Organic Food, http//en. wikipedia. org/wiki/Organic_food, Accessed 16/4/08. 4Channels to market, Mintel selling Intelligence, 2007, Organics Mintel Marketing Report. London Mintel foreign Group, Accessed 25/4/08. 5Industry Statistics and Projected Growth, http//www. ota. com/organic/mt/business. html, Accessed 18/4/08. 6Porter, M. E. (1980). Competitive Strategy Techniques for Analysing Industries and Competitors (The Structural Analysis of Industries), . Macmillan UK, pp. 3-33. 7Davies, M. (1998). 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