Michael Porter’sFive Forces

Model:Fertilizer Industry

Of India

Submitted by:Yogesh Sharma (37), Sagar Shinde (38), Shiraj Sherasia (39), Shruti Gupta (40),Shruti Srivastava (41), Swati Randhawa (42)

Michael Porter …“An industry’s profit potential is largely determined by

the intensity of competitive rivalry within that industry.”

Porter’s Five Forces

VARIOUS THREATS ASSOCIATED WITH FIVE FORCES:-

1. SUBSTITUTES -Threats of substitutes

2. SUPPLIERS - Supplier power

3. POTENTIAL ENTRANTS -Threats of mobility

4. BUYERS - Buyer power

WHAT ARE FERTILIZERS?

Fertilizers are chemical compounds applied to promote plant and fruit growth.

Types of Fertilizers

1. OrganicBiofertilizers, Manure, Green Manure, Vermicompost

2. InorganicUrea, SSP, DAP, MOP, SOP etc

Introduction to Fertilizer Industry

• As per the GOI in March 2007, Indian Fertilizer industry had made a production of 120.61 LMT of Nitrogen and 56.59 LMT of Phosphatic nutrients.

• The installed capacity if Urea in India is estimated to be 207.57MT. The production of urea in India has reached near self sufficiency.

• India is the 3rd largest fertilizer producer in the world. • The raw materials and intermediates products for phosphoric

fertilizers are imported in large scale to meet the requirements of domestic market. The requirement of Potash is entirely met entirely through imports.

Future Trends• 2007-08 Demand was 26 million MT• 2008-09 Demand 29 million MT against supply of 20 million MT• 2011-12 Expected production 35.5 million MT• Gujarat is expected to play a leading role in fertilizer production

Factors affecting Fertilizer availability• Demand factorsPriceInput pricese.g. Fertilizers and other agriculture related input pricesOutput pricese.g. Crop prices Weather, Irrigation, HYV seeds, Credit availability, Promotion and

Awareness

Factors affecting Fertilizer availability• Supply ConstraintsProduction

– Technology/Equipment problems– Raw material shortage– Power shortage– Labor shortage– Stringent Government Policies

ImportHigh International Prices

A. SUBSTITUTES - Threats of substitutes

Substitutes :1. Bio Fertilizers2. Manures.E.g. FYM, cattle dung3. Organic Fertilizer4. Green ManureE.g. Vegetable and Household waste5. VermicompostE.g. Roundworms

Substitutes are taking the place of chemical fertilizers at a very fast pace for the following reasons:-

1. Reduce expenditure on chemical fertilizers.2. Increase crop yield.3. Increase soil microbial activity.4. Enhances overall soil fertility.5. Tolerant to low pH and high salt.6. Contains and produces growth promoting substances.7. Increase germination of seeds.

Production of Biofertilizers2003-04 9789.89 Tons

2004-05 10600.70 Tons

2005-06 10764.42 Tons

2006-07 16145.26 Tons

2007-08 20111.05 Tons

2007-08

Capacity of Production Actual Production

67162 Tons 18974.065 Tons

GOI financed Units Production Capacity

71 Units 8025 Tons

Others Production Capacity

80 Units 10175 Tons

B. SUPPLIERS - Supplier power

Public sector companies approximately cover 35% of the market share.

Some of the companies are listed below:-NFL, FACT, RCF, SAIL, NLC, PPL, HFC, Brahmaputra Valley

Fertilizers etc.

Cooperative fertilizer companies (2% of the market share)• IFFCO and KRIBHCO

Private companies.(63% of the market share)• Oswal, TATA, Indogulf, Chambal, Nagarjuna, Coromandal,

Zuari, Sreeram etc.

• Though the major chunk of the market share is occupied by the private companies the government organizations exercise certain power over the buyers by providing subsidies on fertilizers.

C. Potential Entrants -Threat of mobility.

• Potential entrants in this sector are various companiesMonsanto and Syngenta who feel that rural markets are still not penetrated to a considerable extent.

• Second set of potential entrants are retailers like GODREJ ADHAR and HARYALI

• KISAN BAZAR who as of now are retailing the products but are planning of BACKWARD

• INTEGERATION : Once these companies get involved into manufacturing the Competition will get even more intense.

D. Buyers - Buyer Power:

Buyers for the FERTILIZER SECTOR are the FARMERS .

1. Spectrum of substitutes available to the farmers is large.2. There are myriad organizations in this sector i.e. Public,

Private and Co-operative.3. Since the buyers are from the rural sections of the society

they can impose pressure on the government organizations to provide subsidy.

RURAL MARKETING IS DEVELOPMENTAL MARKETING!!!!!!