Michael Porter’s Five Forces model offers a framework to study the global ginger extract market. Strategic business managers, trying to gain an edge over competing firms in the global ginger extract market, can utilize this model to better comprehend the industry in which the company operates. The components of each of the forces and the degree of impact of each element in the context of the global ginger extract market have been broken down and analyzed.
THREAT OF NEW ENTRANTS
The global ginger extract market is highly lucrative due to the widening application scope of the product in various industries. Rising consumption of ready-to-eat food products along with the increasing consumption of dietary supplements is expected to fuel the growth of the market. Moreover, ginger extract finds widespread application in personal care products. However, the initial investments and working capital required to efficiently produce ginger extract are high as it requires a continuous supply of electricity and proper disposal of waste.
Hence, the threat of new entrants in the global ginger extract market is expected to be moderate.
BARGAINING POWER OF SUPPLIERS
The production of ginger is mostly restricted to certain countries, including China, India, Thailand, Indonesia, Bangladesh, the Philippines, South Korea, and Sri Lanka. The supplier concentration is high. However, ginger extract manufacturers based in North America and Europe are highly dependent on imports from producing countries in Asia-Pacific due to the low production volumes of ginger in their regions. This has led to a gap between demand and supply of the raw material in North America and Europe. Thus, the manufactures are dependent on imports for raw material supply which is anticipated to increase switching costs. Moreover, key manufacturers enter into long-term contracts with the major suppliers of ginger for uninterrupted supply.
Hence, the bargaining power of suppliers in the global ginger extract market is expected to be moderate.
BARGAINING POWER OF BUYERS
The buyers in the global ginger extract market are manufacturers of food & beverages, pharmaceuticals & nutraceuticals, personal care products, and animal feed. There are several buyers as the demand for ginger extract is exceptionally high in dietary supplements production. Apart from that, ginger is used in several beverages as a flavoring agent. Many beverages manufacturers are introducing new products infused with ginger in order to cater to the requirements of the end customers. For instance, in November 2016, The Coca-Cola Company introduced ginger-infused Coca-Cola in the Australian market. There is limited product differentiation between the key market players, which increases the bargaining power of buyers and lowers switching costs.
Hence, the bargaining power of buyers in the global ginger extract market is expected to be moderate.
THREAT OF SUBSTITUTES
There are no direct substitutes for ginger extract in application industries due to its unique flavoring and health-promoting properties. However, there is a certain degree of internal substitution with the powder and liquid forms of ginger extract used interchangeably in food & beverage products.
Hence, the threat of substitutes in the global ginger extract market is expected to be low.
INTENSITY OF RIVALRY
The global ginger extract market is marked by a high intensity of rivalry. The established players in the market are targeting competitors in terms of quality and price, thus making the industry competitive and reducing profit potential for the existing firms. The key players invest in research and development to bring about innovation in their product lines and make product development a priority to meet changing consumer preferences.
Hence, the intensity of rivalry in the global ginger extract market is expected to be high.
