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Power of Supplier

Diageo being a long established company has a number of contract which supplies raw material to Diageo. To avoid price fluctuation, Diagoe forms a strategic alliance with it's suppliers. Glass bottle is source from all around the world but Owen Illinois Group being the principle supplier which supplies a large amount of bottle's to Diageo. Diageo being the important buyer has got the bargaining power. The cost of switching to another supplier is low because Diageo buy's raw material in a large amount and Diageo does not have to rely on one supplier because they have got lot of alternative to choose from.

Power of Buyer

The power of buyer can be high because Diageo claims the highest share of 28% among the alcohol industries competitors. Since Diageo is dependant on its existing distribution channels The distributional channel may affect the users indirectly for example the supermarket which sells many other products where there are many other substitutes' product in the market and the level of loyalty by users are very uncertain.

Threat of Substitutes

Substitutes can be a threat when the switching cost is lower. Consumers are easily persuaded to buying cheaper products because some products taste and quality are the same. Now that some supermarket already started selling their own brands, makes the competition harder for Diageo. The competition from other competitors using marketing strategy in the supermarkets can persuade consumers to consume other products

Rivalry among Competitors

Being in the oligopoly market, Diageo and its competitors targets are the same. This means that it's a low switching cost for consumers when they buy the alcoholic drink because there are many product in the market and the exit barrier are high. Having competitor shows that there is a very high fixed cost and advertising expense which have to be spent to attract more consumers to Diageo's product.

Threat of New Entry

It's very hard for a new alcohol company to get into the industry since Diageo is a long- established company and is ranked the 1st among the 30 top international brand of spirit. The strong branding of image, quality and consumer's knowledge attributes to consumer's loyalty

To start up a new company, the new entrant will have to use high level of set- up cost to buy fixed asset and also it takes time to establish it's products brand and image in the market.

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