Industry Analysis – United States
In the United States alone, the consumer/households industry contains hundreds of competitors and numerous more worldwide because the brand name consumer goods industry is one of the most expansive industries in the world. An economy of scale defines this industry because it is rather difficult to frequently come up with ideas for new products. The basis for competition in this industry is competing with price, quality of products, constant innovation, and firms selling effort.
Main types of competitors are companies that range in numerous industries and function as companies made up of several different divisions. The competition in this industry is monopolistic with firms that are of almost equivalent size and power with similar influence over the market. Also, this is a mature industry with little differentiation between products and has a low switching cost to consumers. The companies consolidate their powers into certain areas of the industry such as: laundry and cleaning, paper goods, beauty care, food and beverages, health care, and pet food.
The top power holders and rivals in this industry include Proctor & Gamble, Kimberly-Clark, Unilever, Henkel, and Johnson & Johnson. 2 The household goods industry has to follow strict government regulations on the testing of products on animals, comply with FDA regulations on many products, as well as fulfilling federal environmental safety regulations. Most companies try to find alternative ways of testing for their products and work with animal protection organizations to acquire acceptance of alternative testing methods.
To prevent pollution of rivers and bodies of water, many companies are in the process of extensive research to improve pollution and maintain a healthier environment. 3 For the most part most of these regulatory organizations do not have a significant amount of problems with this industry. Furthermore, the role of labor unions plays an important part in the production facilities of large firms in the consumer goods industry. Large firms in the industry must be aware of labor unions and current labor legislation, which regulate employment procedures and collective bargaining just as in most industries.
In order for this industry consisting mostly of convenience products to continue to grow, it must rely on multiple technologies. Areas of advances in technology include structures and materials to make things softer with use of less fiber wood, chemical surfactants and emulsifiers, molecules that capture unpleasant odors to develop certain fragrances for the home, and using substitutes for fats and oils in various foods and cleaning products.
New developments taking place include metal ion control that facilitates cleaning from hard calcium and sodium deposits left behind from water. Other developments consist of products that remove tartar on tooth enamel ranging to providing calcium in fruit beverages, as well as delivering increased bone mass in pharmaceuticals. Some upcoming breakthroughs include further developments in biotechnology that can improve many aspect of consumer goods, novel termite control technology to protect wood structures from infestations, using actonel to reduce risk of spinal fracture in older women, and some innovations in specific compounds that may be applicable to treating certain cancers, HIV, or AIDS.
With low inflation any increases in price will seem greater compared to other goods in this industry and could cause people to shop elsewhere for brand products from cheaper and less established companies. Consumer brand companies find themselves in a bad situation with high inflation that often leads to higher interest rates. High interest rates cause floating interest rate debt and future debt to be more expensive for companies. Since numerous companies in this industry are funded for growth by issuing debt, higher interest rates could slow expansion and investments.
Also, consumer product sales would drop with higher interest rates because consumers would have less money available to spend. The demand for goods in the consumer brands industry will continue to rise and not decrease much as long as the dominant firms continue to improve the overall convenience of their products. This industry does not have to worry that much about foreign competition because most countries import their goods due to the outstanding quality and availability.
The consumer goods industry in the U. S. s popular throughout the world and most companies are global and multinational that caters to developing products of necessity to everyone. Foreign markets such as Europe and Asia do affect the portfolios of companies in this industry because they are global companies, but not to the extent that U. S. market indexes will. Many companies contain small companies within their enterprise to specialize and innovate more efficiently with new products. The companies produce numerous types of products that will be marketed to all people.
Also, companies will spend $millions even $billions on thousands of different suppliers to attend to the variety of consumers. The suppliers of such companies contain an essential role in the testing, production, and packaging of their products. Distribution channels and marketing are very crucial to help the large firms from unavoidable problems that occur sometimes. 6 These companies must produce goods that people will want to buy. Further, companies create awareness for and promote the values of their brands to customers in such a way that people will prefer that brand, which contributes to sales.
When marketing, firms need to communicate to the targeted customers about how their brand stands out better than competitors. Most importantly, this industry must market to people and give them something to associate themselves with because it is an essential strength for a company? success. Ultimately, this industry spends mostly on innovation of capital and products that will lead them to better profits and maintaining a reliable/trust-worthy reputation worldwide.