Threat of new entrants – low In-shore fishing is not very capital intensive. Starting from scratch costs $20,000 – 30,000, but anyone with a boat and a few traps could start a lobster catching business. However, if you want to catch lobsters in large volumes, you’ll have to go offshore fishing as Prelude does. Investments in technology and equipment to offshore fish can run upwards of $1.
8 million dollars as did Prelude’s 4th ship. Bargaining power of suppliers – not really applicable in this case.Unless one considers Mother Nature to be the supplier. Lobsters are pulled directly from the ocean.
Bargaining power of buyers – High. The wholesale lobster dealers that Prelude sold to knew when the company had a big catch and would pretend not to need any lobsters forcing Prelude to cut prices. Recently Prelude has sought ways
...to negate the bargaining power of buyers by making some vertical acquisitions that allows them to move their lobsters from the ocean directly to the consumers. Threat of substitute products – Low to moderate.Given lobster’s standing as a delicacy other sea fares like shrimp, mahi mahi, etc hardly pose any threat of being treated as substitutes among people who want lobster. While there is no substitute for a lobster tail, there are some imitation lobster products available to consumers.
Minced fish flavored with lobster is sold in the grocer’s freezer aisle as bite-sized lobster pieces, and langostino, a 10 centimeter crustacean from Chile, is often served under the moniker lobster in dips and appetizers in restaurants. There are no FDA restrictions against doing so.Rivalry among competitive firms – High. Lobster is considered a commodit
rather than a necessity. There’s no difference between an Prelude lobster or a Bingo lobster fished out of the same ocean, so there’s no switching costs or brand loyalty.
The best way to succeed in lobstering is to catch and sell more lobsters at a higher price than your competitor’s. Based upon the information above – high capital investments, intense rivalry, and low profit margins, off shore lobstering doesn’t seem like a very attractive industry.
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