Five Force Analysis

(I). Industry competitors

In Taiwan the competitors of Instant drink industry are over 25 firms, and you can them buy in convenience stores, supermarket, shopping mall or internet.

Figure 6. Five force

A. Competitors’ concentration → low

The conception of competitors’ concentration is how many competitors share the market in this industry. If there are only three companies share the market, they can control the market price. In other words, when competitors’ concentration is high, the competitive degree of this industry will be low and they will control the whole market.

In this case, 3:15PM in instant drink industry, as we all know there are many firms provide instant drink not only in Taiwan but also all over the world. Instant drink is very common, and also considered a kind of daily necessity. We can find more than 25 brands of instant drink in hypermarket easily, such as Carrefour, A-mart (愛買), etc.

Furthermore, it is convenient to buy other foreign brands in online shop. From these viewpoints, we examine the industry is in a perfect competitive situation. Thus, the competitors’ concentration is low.

B. Product differentiation → become lower

Just as we mentioned above, the products in this industry is very similar, maybe just a little bit different on their flavor. It is in a perfect competitive situation. As far, there

powder rather than oil, and their special technology of oolong flower tea, etc.

Therefore, perhaps we can make a conclusion that Shih Chen Food Company have differentiation from other brands, and also we can attract more attention from customers. However, the era for only one tea bag milk tea is pass. A brand, Taiwan brand, called Chatime (日出茶太), they develop tea bag milk tea. Furthermore, they have same ability to make the milk tea twice with one tea bag. 3:15pm developed a kind of milk tea with milk power, at that time it is creation. But now lots of competitor adopt milk power in their milk tea such as OK TEA(歐可), GREENMAX(馬玉山), MR. BROWN(伯朗), GINO(基諾). How about oolong flower tea? Shih Chen Food Company said they utilized NGO technology- Chu’s fragrance baking to make oolong flower tea. However, there are some firm also have oolong/ black flower tea, such as Wang De Chuan (王德傳), Herdoor (禾多). The different between them is the price of 3:15 pm is cheaper.

To sum up, in this industry, two strategies are in low level. Low concentration and differentiation between competitors become lower. Therefore, from these two perspectives, their rivals in this industry are very strong.

(II). Bargaining power of suppliers

Because there are many companies in Taiwan are selling brewed tea bags, therefore companies import similar raw materials. Compared with other larger companies, Shih Chen Food Company's purchasing power is relatively small, and Shih Chen Food Company requires high quality on the raw materials, therefore the Bargaining power of suppliers is low.

(III). Bargaining power of customers

The Bargaining power of customers is high due to low switching cost of buyers, buyer’s price sensitivity is high and information availability is high too.

A. Why buyer’s switching cost is low and price sensitivity is high?

In recent years, customers become caring about their health so that many instant drink companies began to follow the footsteps of 3:15pm to sell tea bag milk tea that put true tea leaves inside rather than some chemical additives, such as IMEI, Chatime, etc.

Owing to diversity choices for customers, instant drink industry in Taiwan is in hyper competitive. To sum up, buyer’s switching cost is low and price sensitivity is high.

B. Why information availability is high?

Nowadays, due to develop of the Internet as well as online shopping trend, consumers can access a lot of information including brands, comments, ranking via internet. Thus, information availability of buyer is high.

(IV). Potential entrants

In the threat of potential entrants include economies of scale, product differentiation, capital needs, exit barriers, access to the distribution channel, switching costs and so on… In the instant drink industry, they can reach to economies of scale easily. In the limited resource, if produce and sell more they will get higher economic scale. Their product differentiation is low because all products are similar just a little different in flavor but we can’t deny their product diversification. The companies don’t need too much capital needs. Then their exit barrier is low. If your product is good or popular, it is easy to access the distribution channel. The switching cost of buyers becomes low.

It is less chance to see price competition so that retaliation is low. Therefore, in this industry of barrier to entry of film is low. And the entrants will also increase.

(V). Substitutes

3:15PM produce the instant drinks. Separated two parts of customers, when you just want to drink something indoor, the substitutes include mineral water, tea drink, carbonated or sports drink, coffee, juice, milk and so on… The threat of Substitute is high. In addition to instant drinks, it also has different choices when customers want to drink something. The other parts is when you want to drink outdoor, the substitutes also include hand-shake drink and any kinds drink which can be bought outside.

(VI). Summary / Conclusion: Industrial profitability

Over all, this industry is in a perfect competitive situation, their profit will be very low theoretically, but why lots of firms engage in this industry. Due to few entry barrier, the market is easy to access in. For bargain power of buyers and suppliers, there are many kinds of drinks in the market, and you can buy it everywhere, the products are so similar. The switching cost is very low, the consumer will choose the commodity by cheaper, good taste, fashion or other reasons. Moreover, consumers’ taste will change very quickly, maybe they change by their mood, weather, or superstar affect them to pursue it. Furthermore, the price gap between each other are small. Thus, buyers’ bargain power is very strong. About the suppliers, the suppliers of Shih Chen Food Company is from CEO’s village, so maybe the bargain power of supplier is not very big. Furthermore, there are many tea farmers in Taiwan, it is easy for Shih Chen

Food Company to find lots of tealeaves suppliers. Why in this part we focus on

“Taiwan”, due to they address to promote Taiwan tea. But, owing to they want to create something new to catch consumers’ eyes, such as oolong flower tea, they need to rely on import goods to support their creation. Furthermore, Shih Chen Food Company is not a big company and their sales volume not as big as some listed companies are, so they don’t have sufficient power to against big suppliers outside.

However, Shih Chen Food Company have power of brand, and this power become stronger. Therefore, we argue the bargain power of suppliers will become lower. There are many potential competitors in this industry provide diversify drinks, not only instant drinks but also many tea shops, so there is no denying that there are many substitutes in the market. Although the market for Shih Chen Food Company is good now, due to the increase of growth rate, but the situation of the market is very competitive. Thus, firms in this industry are so called survive in a fissure; they have to keep creating new product to catch customers taste, and then they will have opportunity to sustainable survive.