Garmco Five Forces

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3.0 Industry Environment Analysis 3.1 Threat of new Entrants Threat of new entrants to the Aluminum industry in Bahrain is considered relatively low. One reason is government interference in trade where they try to protect the domestic industry by imposing import tariffs, strict policies and land issues, making the entry barriers high. Another reason is the capital requirements and fixed costs that are very high, as the total investment in the aluminum industry in Bahrain accounts to approximately US $ 2.4 billion (“Investment in the Aluminum industry”, n.d.).Furthermore, Garmco benefits from economies of scale, buying and selling in bulks, which reduces their marginal costs (“Economies of Scale”,n.d.). Garmco has the capacity to produce 120,000…show more content…
3.2 Bargaining Power of Suppliers: To Garmco, the bargaining power of suppliers is high. Their heavy dependence on Alba as their main supplier for raw materials makes Alba have strength over them. Furthermore, due to lack of supplier concentration, Alba can increase prices, as a result, negatively affecting Garmco. Also, the bargaining power of supplier is high, as there tends to be a threat of forward integration, which is Alba buying Garmco. 3.3 Bargaining Power of Buyers: Bargaining Power of Buyers to Garmco is low. Customers have little power to exert pressure on Garmco to decrease their prices while continuing to produce good quality coil, foil and sheets. Considering that Garmco has presence in 4 continents, they have more than 2000 customers worldwide (“Welcome to Garmco”, n.d.). Thus, if one customer stops buying from Garmco, others will…show more content…
Furthermore, there is no saturation in suppliers in the market and therefore, Garmco is in a position where competition is not fierce in Bahrain. However, globally, competition is fierce and this could be discussed in terms of low levels of product differentiation, as there is no branding in Aluminium. The Chinese manufacturers have massive capacities and can produce more at lower prices, which makes Garmco unable to compete with them. Also, the European mills, Indian, Chinese and few in Indonesia are very aggressive competitors (Lucas, 2016). 3.6 Competitive Position and industry attractiveness Garmco acquires arelatively low competitive position. This is because of their inability to compete with the Chinese manufacturers, the strength Alba has over them in increasing prices, the availability of substitutes especially in packaging and construction industry along with the aggressive competition worldwide. However, the aluminum industry apart from the high startup and fixed costs is attractive if the smelters entering have the capacity to enter and compete on a global scale especially with the Chinese

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