Uk Organic Food

Contents 1. Introduction2 1. 1 whitherfore this effort was chosen for goatcelledline2 1. 2 Aim2 1. 3 Brief Background of the ingrained diet producing fabrication2 1. 4 Competitive surround? 3 2. PESTEL outline5 2. 1 Political factors5 2. 2 Economic factors6 2. 3 Socio-cultural factors7 2. 4 Technological factors8 2. 5 Environmental factors9 2. 6 Legal factors10 3. Porters volt Forces analysis12 3. 1 Threat of bargon-assed entrants12 3. 2 Threat of trans constellation overlaps14 3. 3 Threat of established jibes14 3. 4 Bargaining advocate of suppliers16 . 5 Bargaining power of corrupters16 4. Conclusion18 4. 1 The diligence at present18 4. 2 Future transforms19 5. Appendices20 5. 1 Critique of tools and research limitations20 5. 1. 1 PESTEL modelling20 5. 1. 2 Porters Five Forces20 6. References22 1. INTRODUCTION 1. 1 Why this constancy was chosen for analysis The chosen intentness for analysis in this cross is the positive feed producing constancy in the Uni ted terra firma. This encompasses groups of firms that levy similar intersection points, in this object lesson, total fodder recruit.In recent years, at that place has been a heightened awargonness in the media in relation to natural eeryy lay down rised nutriment, and a neat emphasis has been placed on healthier eating and a decr sculptural relief in the production of genetic whollyy modified regimen. As this aw atomic deed 18ness increases, it is grievous to analyse the manufacturing in severalize to assess whether the manufacturing is lucky to exist in, and to as current whether it is likely that it testament be penetrated by risingfound competitors.An opposite reason for choosing to examine this point sedulousness is collectible to the lack of an updated Mintel report, or a similar financial report, especially since in that respect has been so oft tautologic upkeep world placed on this patience of recently in the media. In piece to puff a d iscover shot about the macro- and micro- environment in relation to the UK constitutional aliment producing industry, frameworks leave behind be used in place to analyse information about the industry. 1. 2 AimThe aims of this report ar to research and assess the nature of the entire provender producing industry in the United Kingdom. This go out occur by victimization two different frameworks, a PESTEL analysis and the use of Porters Five Forces in devote to in full understand the agonistic micro- and macro-environment of this industry. When the analysis is complete, it will be determined whether the industry is favour commensurate to forecast or non, and future shifts in the industry will be predicted. 1. Brief reason of the UK constitutive(a) sustenance Producing Industry The term natural has been defined by the Organic Trade Association as an ecological production solicitude system that promotes and enhances biodiversity, biological cycles, and basis biologi cal activity based on minimal use of off-farm inputs and management practices that restore, maintain, and enhance ecological harmony 1. In practice, this symbolises that artificial chemical fertilisers and pesticides atomic number 18 not used, and animals be reargond without the drugs that ar normally routinely used 2.Protection of the environment is of great importance, and the quality of the soil is what determines whether the mystify enkindle be deemed as original or not. Historically, it was ordinary practice to muchover stick relatively few family run farms in which total provender was haved, and this could be purchased in farmers marts and smaller stores, much(prenominal) as green grocers. However, since the 1990s, entire nutrient has had heightenth rates of around 20% per year, and figures from April of this year place that extreme food now accounts for 1 to 2% of food sales worldwide 3.This becometh rate has been partly payable to bl give birth-up s uper commercialize place chains adopting ranges of constitutional foods, which is reducing the farmer to consumer link, and providing a commodious freshly modality to eat organically, and too due to an increase affaire from the media in this industry. For warning, large supermart chain Sainsburys has a devout deal than cubic yard organic products, had a 14% increase in sales of its organic produce in 2006/2007, sources all its organic meat, fish, poultry, draw, and eggs from the UK and has contracts with farmers to guarantee paltryer limit prices to ensure the long-term provision of organic beef 4.A quote from Jerry Dryer, who wrote an word called Organic Lessons stated, Organic is present to stay, not a fad marching by in the night 5, which is a hopeful mentionion that the market sh atomic number 18 is set to increase and that invigorated opportunities mess be tar allowed, neverthe slight this will be confirmed or denied at the end of the report. 1. 4 Competitiv e environment? The organic food producing industry consists of a large number of small producers, who produce food which send away be prove as organic by the Organic Farmers and Growers Organic Standards and the Soil Association.Due to at that place being a large number of fragmented producers in the industry, it whitethorn be seen as a competitive market who are vying for the attention of large or small supermarket chains and stores, green grocers, and individual purchasers of organic food. Organic produce in itself is reasonably homogeneous, so all producers in this industry will be trying to make out similar products which are by and large unvarying. This increases contest between the producers as to how they are sledding to ram their goods exchange over the goods of a competitor.thither is in like manner the option of individuals growing their own organic produce, which whitethorn reduce the demand for the purchase of produce. The competitiveness of the environment wil l be discussed in to a greater extent(prenominal) detail when an analysis is carried out using the Porters 5 Forces framework 6. ? 2. PESTEL Un prevaillable, external forces that crook decision making, which thus discover the performance of an industry is known as the macro-environment. The macro-environment consists of political, economic, socio-cultural, technological, environmental, and legal forces, which elicit be referred to as PESTEL forces 7.A good definition of this framework for analysis is given by Kotler 8, which is PEST analysis is a frameual strategic tool for understanding market growth or decline, line of merchandise position, potential and guardianship for operations. This is too useful for forecasting the direction in which an industry is fetching, and the intensity of this change. Factors apprize be assessed and placed in order of importance, so it is clear to see what external factors are the intimately pressing issues in an industry.In order to find out information for to each one and simply(a) of the factors, reliable secondary data sources shall we used, such(prenominal)(prenominal) as spick-and-spanspapers, periodicals, books, trade organisations, administration agencies information, and industry analysts results. Once this kind of analysis is complete, it is clearer to see how to take prefer of arising opportunities, and plan to prevent potential banes that whitethorn occur in the industry. The sections infra break down the macro-environment into six parts. 2. 1 Political factorsGovernment legislation whitethorn dictate what is considered to be organic in a particular land. This report looks at organic food producers in the UK, and this is regulated by the Organic Farmers and Growers Organic Standards 9, and the Soil Association 10. The Department for Environmental Food and pastoral Affairs (DEFRA) states m several(prenominal)(prenominal) outlines of what how produce should be grown and the feeding of livestock , in order for in to obtain UK Government standards 11. These standards vary from country to country, inside and outside of the EU.This can stomach a profound impact on the exporting of produce by UK farmers, as what whitethorn be deemed as organic in this country, whitethorn not be so in another. Relations with politicians requirement to be upheld, as legislation is subject to change at some(prenominal) given time. For example, it recently has been distinct to ban onslaught hen cages functioning in the year 2009 12. 93% of eggs in the UK market come from battery hens, so once the legislation is fully in place, this will not occur. This will increase competition in the market, as all eggs will now be from giving range hens, which may affect the poultry side of the organic food industry.By adapting to meet the new laws now, favourable relations will be unbroken with politicians, and on-line(prenominal) organic egg producers will get hold of to find new slipway in whi ch to gain market share in what may be an increasely unadulterated market. The Government soon provides farmers subsidies, incisively current news from May 2008 assigns that the EU is face to cut the money it provides, and reinvest it with inducings on looking after agricultural land, sooner than giving money to garter produce more food 13.This may benefit farmers wishing to wear the organic food producing market, as they nurse extra incentives to transform their land to organic soil, but may hinder those already in the market due to the increase competition, and the lack of money to produce extra food needed to meet demand. 2. 2 Economic factors The organic food producing industry can be largely affected by the UK economy, such as interest rates, exchange rates, buyer power, and consumer confidence, which will all now be discussed in turn.The current ongoing reference crunch, and in soaring spirits ostentatiousness has decreased chances of any interest rate cuts, a nd a accredited little terror of a downturn is present 14. Mervyn King, the governor of the Bank of England, has previously account that UK inflation will rise above its target and the economy will sharply slow down 15, which does not mean good things for an industry such as this, which relies on bulk buying premium quality products.If interest rates are high, and so it costs more money to relieve from banks, which deters investment, and may make it harder for farmers to convert their land to organic soil and methods of production, as this is a costly business 16. This inflation may experience any employees working in the industry to demand higher remuneration in order to cover any losses that they are making, which can cause a problem for employers, especially if the industry declines if thither is a recession. The credit crunch has also affected housing prices, which have resolveen, and a ollapse in these sales have been predicted to cut consumer come abouting by 8% 17 , which will affect the industry. Exchange rates can affect the way UK organic food producers export their products, as a fast(a) currency can make exporting knockout, if foreign buyers cannot get a lot of produce for their money. Buyer power can have a strong stinting hold over the industry, as available income and voluntaryness to happen can affect the sales of premium quality produce, especially as there are cheaper alternatives. The state of the economy affects spending, as if there is a recession, or currently with the credit crunch in the UK, spending falls.Organic food may be seen by nearly-nigh users and non-users as a premium product, so when disposable income is reduced, this may be something which is cut back on in order to use the extra money elsewhere. If bulk are being more price conscious, new motivations to purchase the produce need to be find aside from price. However, many purchasers of organic food do so because of what it stands for, and is a lifestyle survival which may not be affected by a bad economy. Consumer confidence may be dented if willingness to spend decreases. The more affluent a person is, i. e. he higher absorbs and stop lifestyle someone has, the more likely they are to start or extend to purchase organic food 18. 2. 3 Socio-cultural factors A major socio-cultural factor affecting the industry is the media. A recent heightened ken of organic food issues in the media has prompted an increase in organic food sales, with a 70% increase since 2002 to ? 1. 5billion in 2007 19. There is currently a bit from the media to use the upcoming 2012 Olympic games to promote organic eating, in order to avoid an obesity crisis and to appear a fit and rubicund country.This increase conscious(predicate)ness of the importance of healthy eating and nourishing the country by reducing its ascorbic acid footprint can have an effect on consumer attitudes. The effect of the media may change attitudes of tidy sum towards organic foo d, such as the more impetus placed on this industry in the media, means more great deal are aware of the benefits of eating organically. bulk may then change their attitudes about the way they eat, and believe that it is worth(predicate) paying more for the food, even if the economy is not as strong as it could be. Figures from a recent Mintel report 20 show that attitudes towards rganic food show that populate believe firstly that the food is healthier, secondly that it tastes better, and thirdly that it is better for the environment. With these belief systems enough widely in place, the fortune for the growth of the industry in pecks minds is increased. However, the media may too have a detrimental effect on the industry in two ways. Firstly, there has been bad press saying that the industry is losing its values, and that the industry itself is out of control due to an increased demand and people not knowing the real reasons behind why they are choosing organic 21.Secondly, increased advertising spend (even though it is relatively low 22) can draw too much(prenominal) attention to the industry which is not prepared to bestow the increased demand. A typical shopper of organic food has been outlined in a wad taken from the Organic Monitor website 23, which identifies them to usually live in an urban area in a big city, consider quality and provenance in decision making when choosing which foods to purchase, being well-educated and of a pith to high social class, and to belong to a medium to high income household.These factors have been determined of the types of people who normally purchase these premium products, and usually fall into the AB consumer base, due to a larger disposable income 24. Further analysis of recent demographic trends show that the capital of the United Kingdom and the South of the UK are more willing to accept the introduction of organic produce, compared to the rest of the UK 25. With this in mind, it may be deduced that the se areas are more prone for targeting, and further consideration ineluctably to be given to where the industry should go next should these places become saturated with producers. . 4 Technological factors Technological advances in transportation means that the ease of moving produce around the UK is increased. Better roads and an increase in motorways have advantages for farmers to get their produce into busier cities. Transport has however been scrutinised in this industry in recent years if air freighting is used for the moving of food or livestock, but this will be further discussed under the environmental factors section of the PESTEL analysis.The internet has provided new methods of selling organic produce, such as online shopping, and electronic sourcing of produce to find topical anaesthetic organic food suppliers 26. spirit at figures from a 2007 Mintel report on organic food, box schemes and armor order have had the biggest percentage increase of usage between 2005 and 2007 (109. 2% change in this time period). The box scheme comprises of the delivery of angelical organic produce which is chosen because it is in season in the UK at the time of ordering, and many farms have used the internet in order to allow this scheme to take place.For example, Riverford Organic Vegetables 27 allow people to select different size boxes, and also give information about how much CO2 emissions are given off from the transport of their produce from admission to door. This shows the potential for how the increase in usage of the internet can be applied to the organic food industry. 2. 5 Environmental factors National and planetary environmental issues can greatly affect the UK organic food producing industry, such as weather and climate change respectively. Without the right growing conditions for some organic produce, i. . having good, well-nourished soil, harvesting may not reap many rewards. Last year in 2007, the wettest weather for more than 240 years was put down in the summer by the Met Office, which frankly had perverse effects on this particular industry 28. Following this particular summer, it was reported that organic food prices would rise even further than the already premium costs that they have, partly due to the weather reducing the derive of land fit for civilisation in order to grow and harvest organic produce 29.If adverse weather conditions do occur, the supply or organic goods will be reduced further as yet, which may strongly affect an industry that already has increased demand and not enough produce to meet this. mood change has gained increasing coverage in the media, convincing more people than action needs to be taken in order to nurture the earth, in particular, the flavour of a carbon footprint. A carbon footprint can be draw as a appraise of the impact of human activities on the environment in foothold of the amount of greenhouse gases produced 30.This affects the organic food producing industry when organically grown produce is air freighted into the UK. The Soil Association is bratening to remove its stamp of approbation from organic food which has been imported by air, as they believe this to be increasing the carbon footprint, and going against the morals that organic food stands for 31. This change may benefit UK organic food producers, as there will be less competition coming from overseas, but may be of detriment for internal UK flights, if this is how they normally transport their goods around the country.The danger here is that people who already purchase organic food may kind of switch to topically sourced produce, be it organic or not, in order to champion the local community, and to do their bit to reduce the carbon footprint. There may be an opportunity here for organic food producers to also trade topically, so that people can get the best of two worlds. A benefit of organic produce is that it attempts to ensure that minimal amounts of pesticides and few art ificial methods are used in the growing of the food.Only 25% of organic food carries pesticide residues, compared to 77% of conventionally grown food 32. This reduces harm to any soil or wildlife in the area, and is reported to have added health benefits, all contributing to less of a bad impact on the environment from harmful chemicals. 2. 6 Legal factors Legal changes in the United Kingdom may affect the behaviour of firms and producers within this particular industry. Back in 1984, the Food Act was introduced, which outlined the description and purity of foodstuffs, and affected the way in which food could be produced 33.This legal act is still all applicable today, and is regularly updated, notably affecting organic food producers in how they can describe and label their food. As well as an organic product having to meet UK organic standards, it also must abide by this Food Act when selling to respective buyers, so as not to mislead customers, i. e. it must be what they claim i t to be, in this case, organic. A europiuman ruling in 2007 states that for food to be labelled free of genetically modified ingredients, it must contain 0. 9% or less of such elements, which may in turn affect the price of organic food 34.Producers need to factor these sorts of legal requirements into pricing how much they are going to sell their food for. For the past few years, recorded minimum wage has risen, with October 2007 being the last re captivate at ? 5. 52 per hour for workers develop 22 and over, ? 4. 60 per hour for workers aged 18-21 inclusive, and ? 3. 40 per hour for all workers under the age of 18 who are no longer of despotic school age 35. These increases may pose problems for producers who cannot afford to meet these payments, especially if inflation ontinues to rise, and the credit crunch continues to beckon a recession in the financial market. If the producers cannot afford workers to help them look after livestock or harvest crops, this may pose to be a b ig threat as to whether they can afford to meet the requirements of customers. ? 3. PORTERS quintupletsome FORCES The micro-environment is a set of forces that directly impacts the ability of an industry to serve its customers, which were described by Michael E. Porter in an analytical framework as flipper forces that determine the competitive intensity of a market.This can also be described as the attractiveness of an industry 36. It must be remembered here that even if a market is determined to be attractive, this does not mean that every firm in the industry will yield the comparable profitability. Only by having uniqueness in resources or a distinctive business model can help to achieve greater profits. The five forces suggested by Porter are the threat of new entrants, threat of substitute products, and threat of established rivals from horizontal competition, and the negotiate power of suppliers, and bargaining power of buyers from vertical competition 37.The strength of these forces combined determines how competitive the industry is, and can determine whether it is favourable to demean. In reference to Porters Five Forces, the term industry will be used to describe any products which are similar, and are close substitutes for each other. These five forces that affect how competitive the industry is will be discussed below. 3. 1 Threat of new entrants In order to assess the threat of new entrants in the industry, it needs to be assessed whether the barriers to entry in the UK organic food producing industry are high or low.This will be looked at in relation to economies of scale, product differentiation, cost disadvantages in relation to the swell needful, and access to distribution channels, in relation to UK organic legislation. Economies of scale occur when the costs of producing are reduced from making more units, as it is more efficient to increase output. some(prenominal) organic food producers may benefit from the fact their purchasers may be large supermarket chains, who have the ability to buy in bulk due to the benefits of their economies of scale. Organic food producers an then sell their goods to these chains, who realise that their customers are becoming increasingly aware about the benefits of this quality produce. However, due to these chains being in a position to buy bulk, in order to manage in this market, organic farmers may have to sell their goods at a cut price if the supermarkets want to sell it on to turn a profit. In this case, new entrants may be put off from enter the market if they cannot afford to manage with already established providers of organic food to these main players.Product differentiation is an issue, as the organic products in this industry are largely homogenous. If new entrants wanted to penetrate the market, they would have to think of existenceal new ways for buyers to remove their products over another product which is the similar as the one they are offering. This doe s however mean that producers already in the market may have less competition enter alongside them, as long as the existing producers offer fair prices and direct quality food, with well established networks.Cost disadvantages may pose a threat to new entrants, as a large amount of capital is required in order to enter the market. Firstly, modern agri-technology is expensive to purchase, and the largest cost of decision making to produce organic food is the conversion of land 38. In order to convert land so that it meets the UK Organic standards requires a great capital investment, which is one of the reasons why the supply is still short. This may put off potential entrants to the market if they believe they cannot afford to make their land meet national requirements.These national requirements are subject to change, so barriers to entry can be heightened or lowered at given times, depending on what is decided by the ruling bodies. This may also affect international entrants, as national standards vary in different countries. What is seen as organic in one country, may not meet the requirements in the UK, so producers may be protected from further competition in that respect. For example, new regulations in Japan caused the majority of products to lose their organic status 39.This also ties in with access to distribution channels, as UK producers may be fighting for length on supermarket shelves or stalls in a local farmers market, and only the best will survive. Even though supply is short, a particular amount of space is still given to organic produce, which on one hand may deter entrants into the industry, but equally may give some producers wishing to enter the market a bigger incentive to increase awareness about organic produce, and try to meet that supply in innovative new ways. 3. 2 Threat of substitute productsSubstitute products are products which can fulfil the same function, but from a different industry. In the case of the organic food indus try, substitutes can occur in the form of different kinds of eating, or fad diets, such as calorie-counting healthy eating, and or locally sourced conventional produce. First to be discussed is reduced-fat and reduced-calorie food, which may appeal to the organic food shopper. If people are buying organic food as a misunderstanding of what it really is, and do so for the health benefits, then they may switch to specific healthier eating options, rather than organic food.This threat however has been reported to be minimal at the moment, as figures in a Mintel report from 2007 on organic food show that organic food is experiencing a much greater growth than reduced calorie options 40. The reduced-calorie options, as well as functional foods, still continue however to rise in popularity. Locally sourced conventional produce also poses a threat to the organic food industry, as some people may choose to support local farmers rather than to choose organic produce.This is especially diffic ult on the organic food industry, as more farmers may decide not to convert their land to organic if people are more willing fair(a) to buy conventional locally produced food 41. This threat may encourage organic farmers however to sell produce locally, so they are covering both segments of their target market. An example of this threat is posed by milk, as demand for organic milk far exceeds the supply, so people are facing the dilemma of having to buy non-organic locally sourced milk, as this is a necessary substitute for people buying milk in the premium market 42.Organic food may be seen as necessity to some, but to intimately it is a luxury, and conventional foods can replace the premium priced, undersupplied organic food. 3. 3 Threat of established rivals The simplest rival in this industry may be seen as people who grow their own organic produce in their garden or local allotment. This reduces the need for organic farmers to sell their produce to consumers, and this has the potential to reduce the need for them to sell, as it may be cheaper for people to grow their own. Aside from this threat, there are other forms of competition within the industry.Rivals in the industry have different ways of competing against each other, including varied forms of price, marketing strategies, and innovation techniques. Firstly, a sustainable competitive advantage can be gained through the innovation from producers in the industry. For example, organic farmers may decide to provide their goods only to local outlets and consumers, which increases the likelihood of people wishing to buy products which are organic and sourced locally. This can provide a competitive advantage over organic producers in the UK who have a larger carbon footprint by delivering their products crosswise the country.Competitive rivalry may continue here as more competitors enter the market to satisfy the growing demand for organic produce. As new entrants penetrate the market, it needs to be in creasingly thought of new ways to differentiate products, as the nature of the produce in this industry is largely homogenous. There is not a large diversity of competitors, as organic produce is the same from one farmers land to another, so competition will be high in order to get people to choose one farmers particular produce.This is also true when considering who will purchase this food, as supermarkets are increasing their ranges of organic food, so competition to get produce chosen to be exchange in these will be high 43. If a supermarket already purchases a particular farmers produce, it may be difficult for other competitors to penetrate the market if customer loyalty already exists, so new ways of doing so will need to be thought of, such as competing on price. This, however, will only be possible to a certain extent, as a profit still needs to be made by the producers in order to continue their business.Existing firms may compete in this industry through diversification o f how the produce is offered, as some farmers may set up a market stall or store in order to deliver their produce to the consumer. An advantage of this is the added convenience to consumers of having a place they know they can go to in order to source locally produced organic food. An example of this is the ever increasing popularity of the chain Planet Organic, which is continuing to expand upon its outlets in urban areas in London, so that people dont have to live in rural areas in order to get there organic food 44. 3. Bargaining power of suppliers There is an estimated 4630 producers in the organic market who have converted their land to organic soil, and this is ever increasing 45. Even though this is still increasing, it is expensive to convert conventional land, so this may be one of the reasons for a relatively low number of suppliers in this industry. This section focuses on whether suppliers in the organic food producing industry have high or low amounts of power over the happenings in the industry. The brand of organic food may be seen as powerful, as there is a high consumer demand for these products.This gives the suppliers the added advantage of being able to choose how and where to supply their produce. However, even though this increases supplier power, the customers for their produce are fragmented, so there may be a reduced bargaining power over price, as there is only so low that producers are able to offer their goods for. Organic food in itself is a unique offering, which gives an alternative to conventionally produced food, and can satisfy the needs of particular consumer groups who crave quality and are concerned with the provenance of what they eat.This allows suppliers to have a greater power over the conventional or locally sourced produce, as organic food is seen as a lifestyle choice and not just one of convenience or necessity. Figures from Mintel show that 65% of people shop in supermarkets where the food is of high quality and i s fresh 46. This choice from consumers gives suppliers the added advantage of being able to provide a service that people actually want. 3. 5 Bargaining power of buyers The bargaining power of buyers in the market can have a great effect on the industry itself, which will now be outlined in terms of how much power they have over the industry.Buying power may be deemed to be relatively low in some consider, but high in others in this industry for a number of reasons. With an increase in demand for organic produce, a large amount of buyers are competing for a relatively short supply of food. This may mean they are willing to pay higher prices for the produce, due to its availability being decreased. This supply famine was outlined in The Grocer, which shows sales were up to ? 3. 1billion when they reported in prove 2007 47. However, few large buyers, such as large chains of supermarkets, may have an increased buyer power due to suppliers wanting their goods to be sold in these stor es, as they can ensure produce is sold via a contract for a certain period of time. This reduces uncertainty for suppliers, and ensures less food is spoiled. The fact that this industry contains a large number of undifferentiated suppliers may mean that buyers have more power over who to choose to supply their produce if there is a large amount of suppliers in that particular area.The cost for buyers of switching suppliers for produce is very low, which further still increases their power, assuming that there is an appropriate amount of supply existing. Buyers are aware that there is a shortage of supply of organic produce, so this may give them less power over suppliers, and over the industry in general. It has been previously mentioned about the increased demand over supply, so buyers may have to pay the prices being offered to them by suppliers if they want this non-conventionally grown produce.Buyers may also have higher power in some respects due to existing substitute products , which have previously been discussed. There is an opportunity in some cases for people to switch to locally sourced conventional food, rather than organic food. This can increase buyer power, if they decide to refrain buying organic food altogether, which may force producers to reduce their prices, or just to exit the market. ? 4. CONCLUSION 4. 1 The industry at present sounding at the information which has been discussed in the 2nd and 3rd sections of this report, deductions and analysis can be made about the industry at present.In its simplest form, the UK market for organic food is reported to be worth ? 1. 5 billion in 2007 48, and this is continually growing. Issues affecting the macro-environment include current Government legislation managed by the Soil Association and the Organic Farmers and Growers Association, buyer power and spending habits in the organic food industry, effects of the growing media attention on the industry itself, new ways to sell produce, and environ mental concerns facing producers. Issues ffecting the micro-environment include the threat of new entrants joining the industry due to a lack of supply and an increase demand, substitute products being present such as locally sourced produce, established rivals having better distribution links, suppliers having increase amounts of power due to the increased demand from consumers, and the buyers having relatively low power due to the lack of supply. This is a small summary of how the industry can be seen at present, and from looking at the information collected, there are various reasons why it may or may not be a favourable market to enter.The fact that demand is high but supply is low is a good reason for wanting to enter the market. This would imply that any produce made would be easily sold, and suppliers would be in a better position to bargain on higher prices, as they are well aware of this demand. However, there are issues in being able to enter this industry. The initial out lay costs are high, as it is expensive to convert land into what is considered to be organic, to buy new technology required to grow and harvest produce in the methods stated by the necessary authorities.It may then be difficult to sell produce in certain areas if people do not agree with the transportation used to get the produce there in the first place. These are factors that need to be taken into consideration when looking at the industry at present, but with expansion set to continue, if the capital is available, it seems favourable to enter. 4. 2 Future changes increase acceptance of organic food means that the future of the industry looks good for the moment.People are beginning to accept organic produce into their everyday lives, and with reported health benefits of switching to these products, sales are increasing, with analysts predicting that sales will in two ways before the end of this decade 49. Increased awareness in the media and new studies into the goodness of org anic produce is driving sales and increasing demand. The notion of eating well is of key importance to the Government in what they suggest to avoid an obesity crisis in the UK, and organic food may be seen as a way of doing this.However, it must be remembered that the future, as with any industry, can be uncertain. Factors that must be faced and planned for in the future include bad press in the media, substitute product switching, and a change in legislation. If the media publishes bad press about whether there are really any extra health benefits from paying extra for organic food instead of conventionally grown food, the demand may fall and substitute products used instead.Products such as locally sourced food are fighting for advertisement space in the media also, so people may switch to this in the future in order to protect the earth, and reduce their carbon footprint. This can all be affected by the hype that is created in the media at that particular time. Standards in legis lation are also subject to change, and if this is to change in the future, it may be the case that fewer farmers can afford to convert their land into organic soil, which will reduce the supply of organic food further.If this occurs, the popularity and publicity of this industry may decline. These are issues that need to be kept in the forefront of the industrys mind, and plans to avoid this, such as proving the benefits of switching to organic produce, need to be made. ? 5. APPENDICES 5. 1 Critique of tools and research limitations 5. 2. 1 PESTEL framework Advantages are listed below Allows the analyst to remove themselves from the industry and look at it more objectively by adapting to the new environment Can avoid taking actions that will lead to failure Can see the context of the industry Limitations are listed below Time consuming Is done by an individual, so important factors can be missed May be difficult to know what to include under each heading, so hard to abide by by oth er people reading the report Industries are always changing, so once it is written, it may have already changed PESTEL analysis only covers the remote environment 5. 2. 2 Porters 5 Forces Advantages are listed below Can effectively analyse competition in an industry, and help decide how to beat competitors Develop strategies for action from the information found and sacrifice them to gain market share in an industry Looks beyond obvious immediate competitors, and focuses on substitutes to the organic produce being offered wider market view Limitations are listed below Also is carried out by an individual, so things relating to competition in the micro-environment may go unlooked This analysis is a static framework, and the industry is constantly changing, so it may not be applicable straight after it has been writtenThese limitations imply that a strategy cannot be made just by looking at this report alone. 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