External Analysis (Opportunities and Threats)

6.1. External Analysis (Opportunities and Threats)

One of the major Opportunities that LOMBRIABONO wants to cease is the growth for environmental consciousness. Most countries, Nicaragua included, are aware of the catastrophes that are happening worldwide due to companies disregarding environmental issues and bypassing proper procedures to earn a quick buck. We wish to remind people about the dangers of chemical fertilizers and stress the advantages that or products will have regarding soil, crops, and overall health to farmers and consumers alike.

Another opportunity that we wish to work on is the increase for corporate social responsibility.

In 2012 it was calculated that $600 million dollars was invested in the form of CSR in Nicaragua, more than any other year (Guerrero, 2015).

We also wish to capitalize on the growth of social media in Nicaragua. We believe that marketing via this mean will increase our exposure to the population. Increasing the demand for our product as well as influencing others towards a cultural change that will ignite the fire for a better Nicaragua.

Last but not least, we are aware that the rising price off the cost of living is an opportunity for LOMBRIABONO. The harder it is for families to cover their basic needs, the more likely they are to recycle and join the waste for food program.

Such as we are aware of the opportunities that can arise, we are also aware of the threats. One of our biggest threats comes from the form of competitors. It doesn’t require much of an initial investment to start our business, meaning that it is easily replicable. However, we hope to have the government backing us to counteract this effect. Another threat that we foresee is people starting to do vermicomposting on their own instead of purchasing our products.

However, if that happens we will still make profit from selling the red worms and we would modify our operations accordingly. Last, but not least we see a possible threat in the form of the population refusing to participate in the waste for food program.

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6.1.1. Porter’s Five Forces Analysis

Risk of entry by potential competitors (3/5) – Due to the nature of the industry in the beginning the risk is elevated, but it is still not significant because of capital requirements, land requirements, and switching costs, all of which are relatively medium to high. However, once established we believe that our brand equity and differentiation will mark the difference.

LOMBRIABONO is a social enterprise like no other in Nicaragua and that should guarantee customer loyalty once the brand name is popular. We also believe that distribution is key as the penetration of our products in various points of sales will diminish the risk of entry by potential competitors.

Due to the nature of the industry, economies of scale will further guarantee our position as the leading vermicomposters. We will enjoy economies of scale with the amount of people joining the waste for food program as well as from the distribution networks and from producing larger quantities of product.

Last but not least, governmental support will further our lead as the dominant producer of organic agriculture and the benefits of vermicomposting, such as its high nutrient content, its ease and safe use, and the added benefit that it is providing to the community thanks to the waste for food program. Another way that we will fight the buyer’s propensity to substitute is by keeping the prices of our products competitive and close to what the market determines is what people are willing to pay for them. We do not plan on charging a premium, at least not before the name brand is established and we can determine that we can charge a little more.

We also need to take into consideration the number of substitutes available in the market, starting with other forms of organic fertilizer and ending with chemical fertilizers. Other types

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of organic fertilizers include bokashi compost, compost, and gallinaza (hen droppings). Here is where differentiation and quality will be key. We hope to not only differentiate with the actual product itself, generating vermicomposting of great quality and ensuring consistency, but also with the mission to feed families. We want to stand out as a product that isn’t just making profit, but returning some of the profit back to the communities.

Unfortunately and fortunately in this industry the switching costs are very low. Unfortunately, because it means that our customers can switch without much hassle, fortunate for us however, is that we can easily convert users of other fertilizers into our customers reminding them of the advantages that our product and our program will bring to Nicaragua.

Bargaining power of buyers (3/5) – The bargaining power of buyers is a medium force because although there are many existing substitutes, there are other measures that are to our advantage. For example, the concentration ratio is at our favor with only three suppliers of vermicomposting in all of Nicaragua the competition for this specific product is limited. We also plan on minimizing the dependency of existing channels of distribution by placing our product in many different points of sales and having the option to distribute the product ourselves independent of any distributor. Another advantage is that we have low fixed costs and high variable costs meaning that we can choose to diminish the output of vermicomposting if the buyers wish to force the prices down. Lastly we would want to counteract any measures by creating customer loyalty by giving discounts for purchasing large quantities.

Power of suppliers (1/5) – This is the weakest force to our business. Our only supplies are water and waste, which both are found in abundance in Nicaragua. We are certain that we will have no issue coming across people who would want to join the food for waste program as well as companies who have problems dealing with food waste management and would like us to take care of that for them.

Rivalry among established companies (2/5) – This factor is of medium threat. The competition in the organic fertilizer industry is weak and even more so in the

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national competitor (LA GARNACHA), both producing small quantities of the product. We plan on excelling in this area by taking advantage of marketing and the masses for food waste and production of vermicomposting. The competition in the chemical fertilizer industry is higher with major player DISAGRO as the main competitor, but at an initial stage they are not our focus. Besides marketing and the masses, we will innovate to ensure that our message, our impact and our product keeps growing to meet the demands of our people.