AluCo is one of the world’s largest aluminium producers. It also makes a wide range of alloys, which combine aluminium and other elements and have specific properties. The company has hired you to look at AluCo Closures, a subsidiary that makes two alloys – the 3-series and the 8-series – which are used to make bottle tops (closures). The 3-series is harder and is used in water and carbonated drinks. The 8-series is softer and sold to spirits companies. AluCo historically has maintained the highest product quality in the industry and the company maintains a 65% market share in both markets. “Is it a good business to be in?”
From information above I’d break down the problem into five key forces of pressure within industry
- There are barrier to entry – Since AluCo’s industry is in alloy production, there are barrier for new entrant to entry in this field. Making alloy should combine aluminium and other elements and have specific properties. Such as activities needs high investment, from technology, people and research and development.
- Suppliers are not threat – Whilst AluCo Closure is subsidiary of AluCo (one of the world’s largest aluminium producers), it has no difficulty to get suppliers. AluCo will provide materials from their supplier in order to perform AluCo Closure business.
- Rivalry is not a threat – Having 65% market share show AluCo’s dominant position. So threat from another competitor is not a big deal.
- Substitute is a product which can replace alloy closure and for this case plastic might became subtitute. It has possibility the buyer change alloy to plastic since the price.
- Information about buyer doesn’t mention in this case
From my analysis I have conclusion that this is an attractive industry, so it’s good business to be in.