Recommendations to Martin of Waterdrop for Entry in Competitive Market

Recommendation to Martin for Market Entry
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Question: Based on the information provided in the case study and your knowledge gained in MARK5700 this far, Should Martin enter this highly competitive supply-driven market dominated by big players? Discuss, and give at least two main reasons for your decision supported by evidence.
Martin's highlighted market represents an idealistic approach towards entering the market, but the case requires external environment analysis before recommending the action. Therefore, based on the analysis of the case and the industry that Martin seeks to target, it serves the analysis best to deploy Porter's five forces to analyze the competitive environment.
Porter's Five Forces

Analysis

Power of Buyer

The power of the buyers within the industry is high as the customers have lower switching costs, and the availability of another substitute further creates more stress for companies to remain competitive (Bayona-Saez et al., 2017).

Power of Supplier

The power of suppliers within the industry is low since companies seek to purchase in large bulk quantity resulting in economies of scale (Chia-Jen et al. 2018). Regardless the syrup formula holds the key to the business model; hence the power of suppliers is intermediate within the beverage industry.

Threat of Substitute

The Threat of substitutes is determined by the similar product that the customer can switch to and the variance in price. The industry operates on a competitive pricing model, and therefore, the Threat of substitutes for Martin is high (Bayona-Saez et al., 2017).

The Threat of New Entrant

The Threat of new entrants is determined by the amount of capital required and the barriers to entry in the industry. Therefore, within the given case, the capital requirement is higher, and the barriers to entry within the industry are high (Chia-Jen et al., 2018). Hence, the Threat of new entrants is low.

Competitive Rivalry

The competi...